Omitted Bank interest

New client with missed interest

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Good afternoon,

We had a new higher rate client come in the last year, who was doing his own tax returns and never filled out any of the bank interest section on his self assessment in the last 6 years or so. I checked and he has never exceed the personal interest allowance and income was always around 65k for the last 3years and 40k for the 3 years prior. We filed for him last year where his income reached 65k plus 12k of dividend from his LTD company, and when i asked him about bank interest, he said he didn't receive any as he used the money prior to put down a deposit for a new home. He's come to me that it turns out he did receive about £15 worth of interest in an small savings account that he forgot about. In this case, is it worth me to change his last return and is it likely that HMRC will send out any letters for the missing interest, given that there is no difference in tax liability?

Any experiences or suggestions would be greatly appreciated.

Thanks

Pete

Replies (18)

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By IWantToLearn
14th Sep 2022 16:17

I'd change it on the basis that he has told you now that he has it (wouldn't want to omit it).

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Replying to IWantToLearn:
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By Mr_awol
14th Sep 2022 16:23

IWantToLearn wrote:

I'd change it on the basis that he has told you now that he has it (wouldn't want to omit it).

You'd amend a Return over £15 of bank interest which doesn't affect the tax liability in any case?

As you can probably guess from that question - I wouldn't......

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Replying to Mr_awol:
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By Cloudcounter
14th Sep 2022 16:26

Neither would I

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Replying to Mr_awol:
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By Paul Crowley
14th Sep 2022 16:26

Nor me
Just more clutter

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Replying to Mr_awol:
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By IWantToLearn
14th Sep 2022 16:39

Mr_awol wrote:

IWantToLearn wrote:

I'd change it on the basis that he has told you now that he has it (wouldn't want to omit it).

You'd amend a Return over £15 of bank interest which doesn't affect the tax liability in any case?

As you can probably guess from that question - I wouldn't......

I would yes, for the sake of 2 minutes' worth of time amending, submitting, and savings.

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Replying to IWantToLearn:
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By Mr_awol
14th Sep 2022 17:09

IWantToLearn wrote:

I would yes, for the sake of 2 minutes' worth of time amending, submitting, and savings.

What savings?

And the 2 minutes you say it will take - does that include making the adjustment, re-printing/saving the SATR, checking the tax hasn't changed, sending it to the client with an explanation that it's amended, reason, etc, getting their approval (somewhere between a couple of minutes and a couple of months later), submitting the Return and then printing or saving the submission receipt, etc.

When was the original Return submitted? Although the original enquiry window is unchanged, would you be happy if you were to create a new (extended) enquiry window for the amended Return?

I appreciate that I (we?) have probably spent more time (certainly collectively) discussing it than it would have taken you to do the above, but I suspect that you're probably in the minority if you'd amend for this.

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By Paul Crowley
14th Sep 2022 16:25

HMRC will know about the interest and will do nothing about it unless there is an associated tax liability
I have had a few conversation with the agent dedicated line where client tells me nil and HMRC tell me what they know, in precise figures.
Usually when trying to get rid of unneeded tax returns
I now choose to guess interest as less than £500 when going through the SA requirement check as clients just so regularly miss out those matters

I have said several times before, All that matters on a tax return is that the tax payable and other sundry payables are all correct.
I would now also add that a white space note is no defence for failure to declare a taxable item

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the sea otter
By memyself-eye
14th Sep 2022 17:45

£15?
Fifteen pounds?

Geez, get a life!

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By bettybobbymeggie
14th Sep 2022 19:54

Waste of time amending - I put in estimated figures most of the time anyway. Who cares?

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By Calculatorboy
15th Sep 2022 22:31

Accountancy seems to attract people who are nervous and obsessively meticulous ....or is it the other way around...does the job make us like that?

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By fawltybasil2575
16th Sep 2022 01:11

@ pukkiep (OP).

Trivial errors are covered by the Professional Conduct in Relation to Taxation (PCRT) agreed between HMRC and the accountancy bodies, here (this is the most recent update – March 2019):-

https://www.icaew.com/technical/tax/pcrt/2019/helpsheet-c-dealing-with-e...

Refer to Para 16, which states that errors which, if corrected, would not result in more than £200 extra tax being payable, are NOT required to be reported to HMRC (on the grounds that the costs to all parties would be at or around that figure, hence its being uneconomic for the correction to be made).

In your case therefore, clearly you are NOT required to notify of the error to HMRC. In the very unlikely event that HMRC should subsequently make an issue of the error, draw the attention of HMRC to this Helpsheet.

Basil.

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Replying to fawltybasil2575:
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By Not Anonymous
16th Sep 2022 09:04

Although it is of course possible for £15 of additional income to generate an increased liability in excess of £200 however I presume the op had checked this before posting.

If the client is making sizeable pension contributions to mitigate higher rate tax and HICBC and is in receipt of Marriage Allowance this £15 could make them ineligible for MA.

Unlikely but not entirely possible.

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Replying to Not Anonymous:
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By Tax Dragon
16th Sep 2022 09:50

Folk (not everyone, of course) can control their taxable income. I remember checking one who was on the higher rate threshold, to see what would happen if her income was £1 higher. Tax went up by a three-figure sum. (I think the next £1 after that reverted to 41 or 42% (including the NIC) or similar, it was just the cliff-edge effect on that first pound.)

My point is that being on those cliff-edges is more often deliberate than it is accidental, and your point is well made.

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By fawltybasil2575
16th Sep 2022 10:31

May I respond to the posts from the last two eminent posters (who make a valid general point).

Whilst, in OTHER circumstances, adding a negligible amount (in this case £15) to taxable income COULD result in a massive additional tax liability, the OP advises that, in THIS case, there would be:-

"no difference in tax liability".

Basil.

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Replying to fawltybasil2575:
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By Tax Dragon
16th Sep 2022 10:45

That's correct.

OP was right to check the tax position, whereas the responses from others (not you - you as usual have been rather more considered in your comment) is fairly represented as being "it's £15, who cares?" Well, the accountant should - at least enough to confirm that there's no (or at most trivial) additional tax.

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Replying to Tax Dragon:
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By Mr_awol
24th Apr 2024 09:31

To be fair (seeing this for the first time due to the necromancy of this thread) the OP had set the scene of no tax implications in their post - and i would say the bulk of responses appear to have taken that context into account.

Two responses (MME and BBE) might be interpreted as "£15 who cares" but i wouldn't say that's a fair reflection of the general theme.

Whether that is by luck or judgement of course is another matter, so whilst the references to relatively obscure situations where the £15 might be important are certainly off topic, they are quite a helpful reminder that even if there is no intention to amend a Return, it is always a good idea to revise the calculations.

This is the same reason i put non-reportable Capital Gains onto my software. Just in case the client later 'remembers' they also sold a rental property, or something equally daft, and a subsequent amendment makes the originally unimportant transaction suddenly relevant.

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Cleethorpes beach
By UpTheMariners
18th Apr 2024 12:57

I stumbled on this post while looking for something else and my initial response was to think it probably took longer to post a Q on AWeb and read the responses than to actually amend the return.

However out of curiosity when I had 5mins I’ve read the responses and actually found it useful.

fawltybasil2575 reminded me of the PCRT which I hadn’t read in a while so was worth a refresher

Not Anonymous makes a point about the cliff edge effect, which has always been my view of accountancy: you have to consider all taxes, one small change affects other taxes if thresholds are breached.

Tax Dragon pointed out that it’s common to have clients close to or even on a threshold if you’ve planned things well.

And so I considered the work flow: get an email saying “I forgot to tell you about £15”, inwardly groan, open the clients notes (never rely on memory), open client on tax return software, enter figure into correct box, compare if “total tax due” has changed, check total income for warnings of thresholds like Child Benefit etc, update client notes to explain why tax software and IR mark are now different than return filed.

Whether this take you 5 or 15 mins my feeling is that it’s time you will not get paid for.
The old accountant I first worked for was hardnosed and I hoped I’d never turn out like him, but day by day I’m getting that way. He used to say “I don’t work for HMRC, I work for the client. But most of all I work for a living.”

So that made me think of the question nobody has asked yet: What has the client instructed the OP to do?

So this post has clarified something for me. My work flow now would be: get an email saying “I forgot to tell you about £15”, inwardly groan, email back “Ok thanks for letting me know. Do you want me to amend your tax return? BTW I charge a standard £100+VAT fee for amendments to tax returns”

Now I know some will object that we have a duty to disclose to HMRC nowadays, at this point we can say £15? Seriously?

And just for completion if we get an email saying “I forgot to tell you about £15000”, I would email back and say “Ok thanks for letting me know. You WILL NEED to file amendment to your tax return. Do you want me to do that now? BTW I charge a standard £100+VAT fee for amendments to tax returns”

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By JCresswellTax
24th Apr 2024 09:47

£15? Seriously. Forget about it.

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