Paying too much tax, or just don't think you should be?

Paying tax is something that none of enjoy doing (or at least I have yet to meet someone who does!), but in certain circumstances you could find yourself paying tax unecessarily, or where you are owed tax back from Her Majesty's Revenue & Customs you've drawn a blank on how to go about it.  Well, here are a few simple tips to help you along the way...

If you have paid tax that you shouldn't have done, perhaps having it deducted from bank interest even though you're a non-taxpayer, or perhaps you're retired, or the income arising belongs to a minor, you don't need to do a self-assessment tax return to reclaim it.  It is possible to fill and file a much simpler repayment claim, called a form R40, which can be found here http://bit.ly/QIn8QI along with full guidance on what to do.

To prevent yourself having to go through this process every year, if the tax issue you have does relate to bank interest (or similar) you can complete a form R85, which can be found here http://bit.ly/NAYUb4 again along with full guidance.  This will stop your bank from deducting the tax in the first place and allow them to pay your interest gross going forward.

If it seems that your having more tax taken out of your earnings or pension than seems right, its worth checking what tax code your employer/pension provider is using.  Firstly does it match up to the one HMRC have sent to you?  If so then check that the code issued by HMRC is correct.  Some guidance about tax codes can be found here http://bit.ly/egCDn.  If something seems amiss, make sure you notify HMRC straight away, and ensure that whoever is deducting tax from your earnings uses the right code going forward.  Provided this is done during the tax year in question then the matter should resolve itself without the need for further action.

Finally, a word of caution.  Possibly you've recently received a tax refund from HMRC, on this I would caution that you treat it warily.  In recent months HMRC have been doing a lot of work to correct the errors made in peoples tax codes (which can affect the amount of tax deducted from your salary, or pension if retired).  What they do not seem to have been doing is marrying that up the taxpayer's self-assessment record.  I have over the last 12 months had clients who have received a tax refund as a result of the tax returns I have completed for them, only to receive a very similar refund from HMRC later in the year.  Eventually HMRC will ask for this back as you've been refunded for the same thing twice, only they'll also ask for interest at a punitive rate.  So always check first before you run off and spend that refund cheque!

This is by no means an exhaustive list of the issues that can arise, but are some of the more common ones that I find clients experiencing.  If you need any assistance, please contact me at HCB Solicitors.

HMRC: A case of Jekyll and Hyde?

Her Majesty's Revenue & Customs (HMRC) have certainly been busy this month, announcing new amnesties and issuing penalties in an approach more akin to the tale of Jekyll and Hyde than the usual manner of the tax authorities.  Lets take a review of some of the last months edicts from HMRC.

 

New style penalties have been issued to around half a million tax payers in the last month for those who still haven't filed their 2010/11 tax returns.  New penalties were introduced in April 2011 to boost the incentive to file and reduce the costs to taxpayers of chasing up missing forms. As a result, anyone who ignores their Self Assessment filing obligations is now liable to higher penalties than in previous years.

 

The penalties issued this month will be for a minimum £1,200, comprising:

• the maximum £900 in daily penalties for non-filing
• a further late-filing penalty of £300 or 5 per cent of the tax due (whichever is higher).

People who receive a late-filing penalty can appeal against it if they think they have a reasonable excuse for not sending their tax return; for example, a family illness or bereavement.

 

On the flip side of HMRC's personality we see a tax amnesty for those having not filed their tax returns for 2009/10 and earlier years.  If HMRC have sent you a Self Assessment tax return or notice to complete a tax return for 2009-10 or earlier and you have not yet taken any action, HMRC are offering you a quick and straight forward way to bring your tax affairs up to date. There is also a dedicated telephone helpline to support you, which can be found here http://www.hmrc.gov.uk/campaigns/tri.htm .

 

So, we see HMRC really hitting hard those who have still not filed their tax returns for 2010/11 (which should have been filed by 31 January 2012), but seemingly letting off the hook those that have reneged in earlier years.  An odd approach to take, and you may call me a cynic, but it does make sense from HMRC's point of view.  The 2010/11 defaulters are easier to identify and the potential penalties are far greater, whereas the older late filing issues have very minimal penalties attached to them.  So, what we are seeing here with HMRC is a combination of a very commercial attitude towards risk and return (something that has been evident in the corporate world of tax for some time) seeping into the domain of personal tax, whilst offering a carrot to those that offer a lower reward to chase down.

 

N.B. Should any of the above affect you, I'd be more than happy to offer advice and assistance.