ISA Interest

jennifernil

Second question tonight, hope someone can advise....

While we were away on holiday a rather intimidating letter came from HMRC virtually accusing OH of not declaring untaxed bank interest.

Our daughter, who was in charge of the house, rang us abroad (an expensive call) to tell us about the letter as it demanded a reply by a date which was before we were due to be home.

Having filled in his tax return, I knew there was no undeclared interest......I have most of our savings in my name as I am a non-taxpayer.....OH only had our current account (Halifax Reward Fivers) and his ISA, also with Halifax for the year in question (09/10).

Daughter then rang HMRC, who of course would not tell her anything, but noted that OH only had his ISA savings and extended the date for contacting them. They said they would look into it and would send a letter if they had resolved the matter. No follow-up letter was received.

The only info in their original letter was the amount of supposedly undeclared interest, the rest of the letter was mainly threats of what could happen if his return was incorrect.

On our return home, just the other day, I looked out his ISA statements and found that his ISA interest from Halifax was exactly the amount in question.

He then rang HMRC and told them this, but they needed him to send proof, which he has done.

So, it seems Halifax has erroneously returned his ISA interest as "untaxed interest", which I understand has also happened to other people.

Today we went into our Halifax branch to complain about what they had done.
The staff were, as usual, not well informed, and insisted that ISA interest was indeed "untaxed interest"! Once we had explained to the wee lassie that, though it was indeed untaxed, being an ISA it was not taxable, she rang the Customer Relations Department.

Their answer is that HMRC had specifically requested details of the interest on OH's ISA.......something I do NOT believe. And even if they had, surely as they knew it was an ISA, EVERYONE would know the interest was not taxable.

So, sorry for the long post,.......do HMRC ever request info on a particular person's ISA? And if they ask about an ISA, why would they expect that this interest should have been declared and be liable to tax?

OH has had his ISA for about 6/7 years without problems, so we really do not understand what is going on here......other than that Halifax have made a BIG mistake, but will not admit to it.

BoGoF

Basically no, HMRC would not ask for this info except in an Enquiry case. Seems that, like you suspect, Halifax have incorrectly returned this interest as taxable gross interest.

jennifernil

Thanks. I will report back what feeble excuse they come up with next.....should be interesting!!

Lokolo

BoGoF wrote: »

Basically no, HMRC would not ask for this info except in an Enquiry case. Seems that, like you suspect, Halifax have incorrectly returned this interest as taxable gross interest.

As above, I think there are a couple of threads about this in the Tax Free savings part.

Halifax were also sending wrong things such as subscription amounts at the end of the last tax year from what I can remember.

AirlieBird

jennifernil wrote: »

So, sorry for the long post,.......do HMRC ever request info on a particular person's ISA? And if they ask about an ISA, why would they expect that this interest should have been declared and be liable to tax?

It is mandatory for financial institutions to report details of every ISA they manage to HMRC at the end of the tax year. The details include the amount deposited and the amount held in the ISA, but not the amount of interest paid during that year. Separately financial institutions are required to report details of interest paid to all non-ISA accounts to HMRC.

jennifernil

That's fine, and to be expected, but Halifax claim they were asked to provide interest details specifically for my husband, by name.

OK, so they provided interest details on an ISA on request.......so everyone knew it was an ISA. So why would HMRC now be accusing my husband of making an incorrect tax return? And believe me, the letter he received was pretty intimidating.

It seems pretty clear to me that Halifax have made a mistake here and reported this as interest paid gross, with no mention of "ISA".

I have heard that other people have also had the same problem. Luckily I file and keep all our paperwork for at least 6 years, I have heard others have had a problem proving their interest was from an ISA, and that Halifax were not helpful.

AirlieBird

What you need to find out from HMRC is how they obtained this information. I would ask them if it was reported to them on a section 17 return (which is the technical term for the reporting requirements for interest paid on taxable accounts). Interest paid on ISAs should not be included on a Section 17 return. You may also want to find out if HMRC hold details of the ISA for the year in question.

I should imagine that HMRC would be aware of any reporting errors, if that's what this is, but in case they are not aware of this issue then it might be worth writing to the Savings team (Contact details).

John_Pierpoint

When this sort of thing happens, it is c0ck-up or conspiracy. in my experience 90% of the time it is c0ck-up.
There are pages of the tax man's manuals dedicated to finding tax payers with multiple ISA's taken out in the same tax year.
Could someone have accidentally thought your husband might be in this situation? Your name is not Smith is it?

Please don't complain and further delay our creaking monstrosity of a tax system. Just move on with your life.

https://forums.moneysavingexpert.com/discussion/3302190

AirlieBird

I wasn't suggesting the OP should complain to HMRC whom I believe have only acted on the data provided to them in good faith. I was suggesting the OP contacts HMRC to find out the facts as the question is did HMRC actively seek this information or did Halifax erroneously provide it to them on a routine return when they shouldn't have.

I disagree that the OP should forget about it and move on with their life. If Halifax have made a mistake then surely making HMRC aware of this is the best thing to do so that other people don't have to go through what the OP has, and if necessary HMRC can improve their guidance or take the necessary action with Halifax to stop it happening again.

jennifernil

Although we have not yet got to the bottom of exactly what happened, my husband did get a call from Halifax today.
They claim new rules came in last year and that they now have to send in information on interest paid on all accounts.
They do however seem to be tacitly admitting that they screwed-up somewhere, as they have offered him some compensation for all the hassle and phone calls.

They will also be sending a follow up letter, which MAY offer an explanation of what went wrong. Depending on what the letter says, he may contact HMRC to get more details on how they came by this incorrect information.

chrismac1

There is one way of getting to the bottom of this for certain - it will cause these organisations a lot of pain though. It is a Data Protection Act request on your husband's files. I'd be tempted to just mention this in passing to Halifax if they are stonewalling, this puts the fear of God into them and suddenly a finger might get removed from where the sun don't shine!