My father has just realised he incorrectly classified his employers (gross) pension contributions as his own therefore qualifying for extra tax relief (he is a high rate payer) and the online SA form has calculated a refund for him. My question is does anyone know if this will be picked up by HMRC? Do they track all pension contributions to SIPPS and other types of pensions and know the difference between employer and employee contributions, or do they just rely on the tax payer to get it right on their tax form? He is going to wait until they contact him however I'm not sure how they would identify this error. Any comments would be helpful
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"He is going to wait until
"He is going to wait until they contact him".
Why? If he has claimed relief he isn't entitled to, shouldn't he be correcting his return?
If it was accidental, it should be corrected as soon as possible. If it isn't corrected, surely that is (illegal) tax evasion - or am I missing something?!
yes, they do
tell him if he doesn't correct his tax return, he is likely to be jailed for fraud and tax evasion.
You will probably go down as well, as you are an accessory to the crime.
I am astonished at this question. What does the likelihood of being caught have to do with anything?
Your approach makes no sense. If HMRC identify the error and contact the taxpayer he will face prosecution. If the taxpayer corrects the error at the first opportunity all will be in order. So what is the best, and right, course of action for the taxpayer to take? Not difficult is it?
Correcting errors
If it's a genuine error, why wouldn't he correct it?
He's in time for 2012/13 http://www.hmrc.gov.uk/sa/correct-repay.htm#1
Penalties are adjusted for HMRC perception of taxpayer culpability and behaviour - Taxaid give you a decent summary: http://taxaid.org.uk/guides/tax-returns/enquiries-and-other-problems-wit...
If you've come for comfort that putting his head in the sand will be fine, you won't find it from professionals who adhere to strict professional ethics and integrity.
Neleem, assuring him that HMRC put the responsibility on the taxpayer to get things right and correct errors - supported by a penalty system that rewards "good behaviour" with potential elimination of penalties - is the direction to take. If you advise him along these lines and he continues to favour concealing, you've done your best by him.
It is called SELF Assessment
after all.
He's self assessed himself wrongly an therefore needs to correct the error and the self assessment.
Point him at HMRC site "Penalties for errors on returns, payments and paperwork" and the potential penalties made worse if he leaves it for HMRC to discover & correct, so as noted in that section:
"For example:
if a penalty arises because of a lack of reasonable care, the penalty will be between 0 and 30 per cent of the extra tax dueif the error is deliberate, the penalty will be between 20 and 70 per cent of the extra tax dueif the error is deliberate and concealed, the penalty will be between 30 and 70 per cent of the extra tax due
The penalty can be reduced if you or your client tells HMRC about the error. HMRC may make further reductions depending on the quality of the disclosure. Penalties can be reduced by:
telling HMRC about the errorshelping HMRC work out what extra tax is duegiving HMRC access to check the figures"
Realise the error, tell HMRC, correct the return and pay the additional tax and you would hope to push the 0-30% penalty down towards 0%
Leave it for HMRC to find and it will cost him 30% of the additional tax on top.
People don't always ask what they really mean
In my experience, people don't always ask exactly what they mean, particularly if they think they may have done the wrong thing. This is often just human nature, I suppose.
I must admit, they way that you had phrased your question, I wondered whether the real question behind it was "My father made a mistake on his tax return, do you think HMRC will pick this up, or will he get away with it?".
Obviously, I'd be wrong in your case, though.
If your father makes the correction himself then he virtually guarantees that will only have to pay the additional tax that he should have paid anyway, plus some interest.
If HMRC pick this up then he will have to pay the additional tax, plus interest, plus quite possibly penalties.
There's been a lot of good (and free) advice on here for you to use. Sorry if you don't like it - that's just the nature of a public forum.
Neleem Patel
If your dad was overcharged by mistake by the local mot garage/ pharmacist/ whoever. Do you think they should contact him when they find out or keep quiet until IF & when he discovers it ?
By asking your question I am sorry to say I have a feeling you are trying to establish if your dad can get away with it.
.
I am pleased to tell you all that the matter has now been resolved after a phonecall to HMRC this morning. The treasury will now be richer to the tune of seventeen pounds and sixty pence. (no penalties or fines).
In the light of the original question I confess to being puzzled by the small amount of extra tax.
Simple solution
If you genuinely feel upset by "misinterpretation" of your question, the answer is simple. Give a legitimate reason why you needed to know if HMRC verify pension contributions.
As it stands, no-one has been able to come up with a reason for asking the question other than "can we get away with this?". Since this clearly offends you, perhaps you could posit your reasoning for asking in the first place. Your assertion that, if they didn't verify, you would deal with it "in your own good time" sounds a lot like "see how long we can get away with it" so I'd go with something better than that if I were you.
Regardless of the tone, the information about why leaving it to HMRC to notice is a bad idea is good advice anyway. Even if you really were planning to deal with it in "your own good time", you should be grateful for being told why doing that is a bad idea. I would go further and say that expecting penalties to be at the level of careless error (max 30%) was optimistic. If you knew of an error and did not notify HMRC then I would say you were moving into "deliberate and concealed" territory.
Over-claimed contributions must have been £44. Not much for an employer to pay over a whole year.
No you haven't
I've re-read everything you have posted, and the closest you come to a reason is "if they don't we will deal with it in our own good time". Since that boils down to "we will get away with it as long as we can" then your offense at being treated as a tax evader is a bit OTT. I have provided a reason, If that is not good enough then I can make one up if that helps my query get answered? LOL
Also, if the figures were genuinely as small as you are now indicating, then why ask at all? Would you get more offended if I said that I have trouble believing that they are genuinely the value of employer's contributions on a higher rate taxpayer?
Perhaps you should not ask a
question on an accountants website if you got what you expected....Can I suggest next time that you ask the man down the pub, I suspect you will get the answer you would have preferred - might not be correct but hey who cares...
... now if you'd said the tax was <£20 originally
I might have tailored my answer to "it's within HMRC assessing tolerances and they're unlikely to be interested"
Hey ho
What did you expect?
I know someone else on here will want the last word, so feel free to do so.
Thanks to the posters who provided courteous and respectful responses.
Although overall I don't think this chain has been the best advertisement for accountants.
You asked for comments ... and you got lots.
It's an open forum primarily for accountants, so why should we restrict our answers to the narrow question that you raised? Especially when, as many suspect, there may be broader issues involved.
I was wrong...
he is the man down the pub...giving the type of advice that us as a profession have to deal with in the aftermath in order to help the client who has been given the questionable advice...