Problems with the returns you have submitted
Help with your Tax Return guide
If you realise that you have made an error on your tax return
There are time limits for correcting mistakes on tax returns. Tax returns can be amended within 12 months of the normal 31 January filing deadline (extended if the return is issued late). This should be done on-line for returns originally submitted on-line and on paper for returns originally submitted on paper.
After this, taxpayers may make a claim for overpayment relief up to four years from the end of the relevant tax year. There are strict conditions about overpayment relief and it may not be available in all circumstances. You will normally need professional advice to make an overpayment relief claim. After 4 years, the figures become final. A late claim can be made in exceptional circumstances but such claims are rarely accepted by HMRC.
If HMRC raised an estimated tax demand, a ‘determination’, then you have 3 years from 31 January filing date, or 12 months from the issue of the determination, if this is later, in which to file a return and replace the estimate. After this, the only option is Special Relief. This will only apply in very exceptional circumstances.
Correcting your tax return https://www.gov.uk/self-assessment-tax-returns/corrections
Overpayment relief – Technical information on HMRC website https://www.gov.uk/hmrc-internal-manuals/self-assessment-claims-manual/sacm12000
Special Relief – On TaxAid website – tax debt guide bankruptcy – last item on page.
Penalties for errors and mistakes on returns
There is a ‘behaviour based’ system of penalties for inaccuracies on tax returns. These range from 0% to 100% of the tax underpaid (or refund over claimed). 0% applies where a taxpayer has taken reasonable care, but later discovers an error and discloses this to HMRC. At the other end of the scale, 100% penalties can apply when a taxpayer deliberately makes a false return, conceals the fact and only accepts the position following a challenge by HMRC.
Reasonable care – no penalty;
Careless behaviour – 0% and 30% ; if after prompting by HMRC- 15% minimum applies.
Deliberate misstatement –20% and 70%; if after prompting by HMRC – 35% minimum applies.
Deliberate misstatement, which is then concealed – penalty between 30% and 100%; if after prompting by HMRC – 70% minimum applies.
There is detailed technical guidance on these terms on the HMRC website at https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch81110
This means that it is most important to take care, and take advice, before submitting returns to HMRC.
How HMRC processes tax returns
Once you have sent in your tax return, HM Revenue and Customs (HMRC) processes that information. HMRC deals with tax returns on the basis of ‘process now, check later’. If you file your return on-line, there are a few basic checks as you enter the figures; but this is no guarantee that the return is correct.
If you file on paper, HM Revenue and Customs put the information on to their computer system. At this stage the tax office may correct any ‘obvious mistakes or errors’ in the return. They will tell you if they make any corrections.
Sometimes they call to ask about figures if they think this will resolve a problem quickly. But the form is not checked beyond this.
All this has important practical implications. For example, if someone makes innocent mistake on their return by putting a figure in the wrong box, HMRC may not spot the error. The error may mean that the wrong amount of tax is paid, or even that a refund is issued. HMRC may later discover the error and ask for the additional tax; or for the refund to be repaid. In a ‘worst case’ scenario you may have a penalty to pay as well as the tax.
So it is very important to ensure your return is as accurate as possible. You can do this by, for example:
- Taking advice before completing your return – especially for any new or unusual items. Ask HMRC using the self assessment helpline – 0300 200 3310; ask your accountant or tax adviser; if you cannot afford to pay for professional advice, you may ask TaxAid for help
- Checking the return carefully before submission to HMRC. For example, have you entered all the tax deducted from your income correctly? This could be from employment, a pension, savings or deductions under the Construction Industry Scheme. Are your figures for the correct year and in the right boxes?
- HMRC has a number of ‘toolkits to help reduce errors’. These are designed for tax advisers, but you may find some of them useful. Many are for specialist areas, but the ones on ‘business profits’, ‘private and personal expenditure’ and ‘property rental’ are likely to be of more general application. The toolkits can be found at https://www.gov.uk/government/collections/tax-agents-toolkits
- Does the tax bill or refund seem reasonable? The on-line system will calculate the tax due just before you submit the return. If the bill is not what you expected, then re-check all the figures and check that you have all the figures in the right boxes. Check that your figures cover the right period and the correct number of months – particularly for new sources of income. If you file on paper and HMRC calculates the tax due, keep a copy of the return and check it when the tax bill arrives
HMRC later checks a small sample of tax returns in more depth, by selecting them for an enquiry.
Tax calculation mistakes and disagreements
If you think HMRC has not calculated your tax correctly, let them know. You can do this by telephone, or in writing.
There is no formal procedure to appeal, but you can object and ask for an explanation of their figure. If you find there are mistakes, write to your tax office pointing these out. Ask them to correct their calculation. If they do not do so within a reasonable period, you should write to complain.
It is quite easy for HMRC to miss an error when processing a tax return. Mistakes can also happen when information is being input into the computer system. So look carefully at any calculation you receive. If any of the figures are unexpected – too high or too low – ask HMRC to explain the figures, and check that there is no mistake. If you don’t do this, you might overpay tax, or you could be faced with an unexpected tax demand at a later date, when HMRC discovers its error.
If your tax office says that its calculation is correct, and you are unhappy about this, consider seeking personal tax advice to clarify matters. If you cannot afford to pay an accountant or tax adviser, you may ask TaxAid for help. Please also read our Tax Debt guide to dealing with your tax bill.