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Tax Office Error - What should I do?

I am a retired teacher/postman. For the last 4 years I have taken my tax return to the local tax office who have filled this in for me (I have provided all the correct details for them). I have just taken my latest form into them and they have advised me (after looking at last years form) that there is an issue. I receive 2 types of foreign dividend - a. Commonwealth Bank of Australia (Approx £900 per 6 months fully franked at co. rate of 30%)

- b. Santander (approx £20 per 6 months with 19% witholding tax)

Even though I have provided tham with the actual statements from both companies, they filled in the total amount I receive against Santander.

This must have happened the first year (2005ish) and they have just copied/repeated the mistake since...

What do I do now? What are the consequences of this error? I believe that the error was in my favour, so will I have to recompense the taxman. Any facts/advice would be greatly appreciated as I have no experience with this and am worried regarding the outcome/penalties

Thanks, Andy

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I'm in a hurry but

Have a look at extra statutory concession A19.  I think you have a case.

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Does it actually affect the liability?

Seems from the post that they have entered the total figures as Santander instead of breaking it down.

It would be interesting to know what tax credits they have entered.

For the Santander it should be a max of 15% - the balance has to be reclaimed in Spain and unless you have a huge holding it's not worth it.

For Australia they should, I think, just have entered the net received and no tax credit

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normal for them

Andy,

I would say assuming from your occupations that you are a basic rate tax payer, the answer is probably that you dont owe anything, and you have not overpaid, althought it does depend on what other mistakes they have made on your return.  The Santander dividend wouldnt give rise to tax, and without looking it up I imagine the witholding tax on the Ozzie dividend should count as "tax paid" in the UK under the double taxation agreement for a basic rate tax payer.

The chances of them looking at a retun like this is almost nil, moreover even if you DID owe them something - and certainly dont put your hand up - if they ever came after it quote "ESC A19" that is to say by taking your return to HMRC you had a reasonable expectation that it was being completed correctly unless you witheld any infromation from them.

So I would do nothing at all myself, and prehaps read up in the notes to the tax return on how each of your entries should be entered to check this years is right.

Regards,

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Commonwealth Bank of Australia

Unless I've misread the rules I don't think any foreign tax credit relief is due on franked dividends from Australia which means that the net figure gets taxed again in the UK.

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ah!

ah, fair enough. I didnt look it up and have a stinking head cold which might explain the brain not functioning properly. For some reason I thought it was covered in the DTA.

Probabably a good idea to give up for the day me thinkgs before I make a mess of a clients return!

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It's all so strange

Suppose you are a higher rate taxpayer and get an Australian dividend of £100 gross with 30% tax deducted, so the net is £70. You have to pay further tax in the UK of £23 (£70 x 32.5%) = £23. your total tax bill is £53.

If instead you get a Spanish dividend of £100, with £18 deducted, you gross up the £100 to be £111, then tax that at 32.5% = £36 , then deduct from this £15 only of the £18 Spanish tax plus £11 UK tax = £10 to pay. So the total tax bill is £28.

If this is all correct, the logic of it all beats me.

 

 

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