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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15839
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, Ive received a letter, check your self assessment tax

Customer Question

Hi, I've received a letter, 'check your self assessment tax return - year ended 5th April 2011'. They will be checking the figure of pay from tax and employment, as the figures from my employer and my tax return differ. I didn't include my employed income on my tax return and tax was collected via PAYE. What is the best way to respond to this, hold my hands up to this error on my part?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

TonyTax :

Hi.

When you complete a self-assessment tax return, you are supposed to include all your taxable income regardless of whether tax has been deducted at source or not. Failure to do so will make any calculation of your tax position inaccurate. If you received a repayment of tax as a result of the incorrect tax return, you will have to pay it back.

What I suggest you do is to write to the tax office and, as you say, hold up your hands to the error, explaining why you left your pay and tax details off the return. Take a look at the notes on inaccurate tax returns here. By admitting to the error as a result of prompting by HMRC, you should limit any penalty they may seek to levy to between 15% and 30% of any tax you may have to pay as a result of the amendments to your tax liability for 2010/11.

I would hope that you won't have to pay a penalty at all given the nature of the error but if one is sought, you may be offered suspension terms whereby HMRC will write to you again in a couple of years to ask you what measures you have put in place to avoid making the same mistake again. If they aren't satisfied with your response, you may have to pay the penalty at that time.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.

Hi, thank you for the reply.


I have read a little about deliberate evasion etc, I just want to ensure that I don't fall foul of this. Is there anything else you recommend to avoid this?


 


Would calling them be sensible?


 


Kind regards,

Expert:  TonyTax replied 3 years ago.
You shouldn't worry about the possibility of being prosecuted for deliberate evasion. It's just not going to happen. Your employer will have advised HMRC of your pay and tax at the end of the 2010/11 tax year so there was no possibility of hiding the income from the tax office.

I wouldn't bother to call the tax office. All you will get is a call centre and they don't deal with enquiry cases. Write a letter and just confess to a silly mistake. HMRC know that most people are not tax experts and people make mistakes. If you are unfortunate enough come up against an overly officious tax office employee, then you can make a complaint. If the penalty is too high, you can appeal against and, if you wish, you can appoint an accountant or tax adviser to act for you. It shouldn't come to that. However, before you write to the tax office, have a think and make sure that you haven't inadvertently left anything else out of the return that should have been included.
Customer: replied 3 years ago.

Ok great, thank you.


I will check this on previous returns too, or should I just ensure correct from 2011 onwards?


 


Kind regards,


 


John

Expert:  TonyTax replied 3 years ago.
I think you ought to look at previous returns too.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15839
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Hi again,


Should I apologise for my mistake and also let them know that I will be checking other years?


 


Kind regards,


John

Expert:  TonyTax replied 3 years ago.
If I were you I'd just say something along the lines of that you apologise for the omission but because tax was deducted at source from your salary, you thought that you didn't need to disclose it.

I'd check the other years before you write to HMRC.
Customer: replied 3 years ago.

Hi,


 


Thanks for your help.


 


I believe I've made two mistakes on my tax returns:


 


1. Omitting my employment figures, although tax was paid via PAYE


2. Including repayment figures as opposed to interest only figures for loan costs, for a rental property


 


I'm just wondering how best to address these mistakes in light of the above letter, e.g. going back 4 years? Would it be advisable to send a letter regarding them prior to addressing the 'check your self assessment tax return - year ended 5th April 2011’ letter?


 


These mistakes have been corrected on my return 12-13 (prior to this letter), and will be henceforth.


 


I wonder if it's advisable just to ensure its correct going forwards rather then trying to amend previous returns etc?


 


I look forward to hearing from you.


 


Kind regards,


John

Expert:  TonyTax replied 3 years ago.
How much difference is there between the repayment and interest figures?
Customer: replied 3 years ago.

Hi,


 


Thank you for the reply, per year approx. £1800 compared to £6300. Will I go to jail?


 


Kind regards,


John

Expert:  TonyTax replied 3 years ago.
You won't go to jail.

That is a big difference which I would be inclined to tell the tax office about. The likelihood is that they will have looked at your older returns and seen that the pay and tax details are missing in any event. This is probably going to cost you a fair amount in tax, interest and penalties but it is better to come clean before the tax office find it for themselves by asking you to review your returns for a number of years. You might also consider having an accountant or tax adviser handle the matter for you.
Customer: replied 3 years ago.

Thank you.


 


How many years should I go back?


 


Kind regards,


 


John

Expert:  TonyTax replied 3 years ago.
That's a difficult one.

How long have you been letting property?
Customer: replied 3 years ago.

approx 12 years.

Expert:  TonyTax replied 3 years ago.
There are several ways you can do this:

1 If the original letter requires a response, then respond and hold your hands up to the pay and tax error for the year they have written to you about and wait and see what happens. If the letter asks you to review older returns, then you really have no choice but to refer them to the earlier years. This would not be my first choice, ie to wait and see what happens.

2 Pre-empt any enquiry into earlier years and refer the tax office to the earlier years' mistakes. Normally, HMRC will only go back six years unless they suspect deliberate fraud or tax evasion. However, there is potentially a sizeable amount of tax at stake and if were me, I'd come clean completely if only so I can sleep at night.

3 Go to see an accountant or tax adviser who has tax investigation experience, let them look at the letter and the figures for all years so that they can tell you what you face in terms of tax, interest and penalties. You can then take their advice or not.
Customer: replied 3 years ago.

Thank you very much Tony,


 


So if I were to go back the six years this would be to 2008 - 2009?


 


With option 2, would I be saying something along the lines of?


 


'Thank you for your letter ‘check your self assessment tax return - year ended 5th April 2011', relating to my employment and tax collected via PAYE. Apologies I omitted this figure on my tax return by mistake, which has alerted me to check other years which I also believe to be incorrect. I would be happy to assemble this information, although I may need to obtain P60's etc. Please could you advise.


 


I believe there may also be a mistake on my self assessments regarding interest and loan repayments, please advise on how I may also re submit these figures to you'.


 


 


Would you suggest including the necessary figures or awaiting a response first, as it may take me a little time to obtain P60's etc. I guess also considering correspondence times etc, this may take a number of weeks and into the next tax year, which may help me a little.


 


If you have anyone you recommend in the east London / Essex area I'd be happy to receive a recommendation.


 


I look forward to hearing from you.


 


Kind regards,


 


John

Expert:  TonyTax replied 3 years ago.
I'm not allowed to make recommendations on this site I'm afraid.

Would you mind leaving this with me until I've referred to a couple of similar cases I dealt with in the last year. I don't have the files with me as they were one-off jobs as opposed to clients that I do work for regularly and I've put them in storage but I will be able to pick them up tomorrow. When 've had a look at those, I'll get back to you.

In the meantime, can you let me know what letting profit or loss you have disclosed in your returns for each of the years you have been letting a property and what those figures should have been.
Customer: replied 3 years ago.

Ok no problem, thank you. I'm very grateful for the responses today. I'm not quite sure if I'm using this site correctly in terms of rating either individual responses or a dialogue. Please do let me know if I need to do it any differently.


 


It is likely to take me a bit of time to assemble those figures too, I'll come back to you as soon as possible, but approx. 10k per year income and up to about 8k costs. I guess the costs would be halved. This is for the last six years or so.


 


Thanks again.


 


Kind regards,


John


 


 

Expert:  TonyTax replied 3 years ago.
If you change the subject of the question, you are supposed to ask it as a new question. We are still on the same topic as far as I'm concerned but there is nothing to stop customers rating more than once as far as I know.
Expert:  TonyTax replied 3 years ago.
Hi again.

Given the nature of the errors in your 2011 tax return, I think it is almost inevitable that HMRC will ask you to review your earlier returns so you might choose to pre-empt that by volunteering the information in order to face a less punitive penalty for an un-prompted disclosure as opposed to a prompted disclosure. If it were me, I'd go back to the first year I received rental income. If you wait for the tax office to ask, they may only go back six years before 2010/11.

You should go to see an accountant or tax adviser to have the number crunching done unless you want to do that yourself and take it from there.
Customer: replied 3 years ago.

Dear Tony,


 


Thanks again for the replies.


 


Sorry I don't quite understand, if I go back to when I first received rental income it’s longer than them going back six years i.e. before 2010/11.


 


Are you able to suggest how I might go about this, e.g. writing to them saying I think they are right regarding the employment figures and that I'd like to review previous returns for errors / anomalies. But how would I do this, then fill them in by paper.


 


If I re-do everything for the last 10 years or so I may have some difficulty obtaining p60's etc. I'm going to need to ask for more time if this is the case particularly as my partner has been quite unwell. Are you able to suggest where I may get replacement p60's from?


 


I'll check for other errors too, pension contribs and savings interest.


 


I did move to a former rental property for about six months and nominate this as my PPR and sold it in 2007; I guess I'll need to declare this when I sell my current home and any CGT on it. But that is likely to be this year or next. Would I need to declare the sale proceeds in the tax year 2007? It was approx 60K


 


Are you able to suggest organisations where I might source a tax advisor, member organisations etc?


 


This is likely to be (I hope) a once in a lifetime experience never to be repeated, but I plan on getting through it somehow.


 


Thanks again,


 


Kind regards,


 


John

Expert:  TonyTax replied 3 years ago.
As I said previously, I cannot recommend anybody to act for you as I'm simply not allowed to by the site management.

My point about the six years is that HMRC can if they deem the infractions to be serious enough, go back as far as they wish.

Ultimately, this is your decision. I cannot make it for you. I personally would come clean completely. I know others who have given HMRC what they asked for and nothing more and that has been the end of it. HMRC may ask for information on earlier years once the errors in 2010/11 are clarified and if they do, you have to provide it.

If you sold a property in 2007 and not all the gain is exempt from CGT under the main residence rules, you should have disclosed the gain in the tax year you sold it. I always tell people to disclose a gain on a property which has not been their main home for all the period it was owned even if no CGT is payable.

Rather than completing new returns, I would set all the figures out on a sheet of paper for each tax year. You could get your P60 figures from HMRC if you call them on the number here.

Given how long it is going to take to get all the information togther, you may as well just deal with the year in question first and see what response you get from HMRC.

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