Incorrectly given gross interest on account

Snarf999

I found out today that for at least the last 10 years (as far back as I can go), I have been given interest gross on my Lloyds TSB bank account. I've been working for 14 years so I think the mistake might go back that far.

I'm not sure how it's actually happened as I believe you have to register to receive interest gross and I informed Lloyds TSB that I was no longer a student in 1998 when I started work (they then changed the terms on my overdraft and other linked savings account showed net interest).

I went into a branch today (which is when I found out) and strangely the branch manager advised that there was not much point contacting HMRC to tell them about this as it would cost more money and time than they'd actually get back (I've calculated I've received something around £500 interest over these years, which means I've been overpaid no more than £100).

I'm going to contact HMRC anyway as I don't want this to come back and bite me, and I also need to go back into a branch to find out properly how much interest I've received. The issue is, where does the blame lie? Is it on me for not noticing the issue? Is it on Lloyds TSB for not changing over my account when I stopped being a student?.

Looking at the statements for my accounts it's clear that some are receiving net interest, but my main account is receiving gross, it's just that no-one noticed!

antonic

Every year every Bank & Building Society have to make a return to HMRC of every account that was registered for gross interest (like yours).

HMRC then datamatch that info against the info they have to see if any accounts have been registered incorrectly and then HMRC decide what to do.

Its possible that HMRC have been aware of your accounts, but because the amount of interest you have received is so small, that its not worth them contacting you to demand payment OR derergister your accounts.

During the time you have had the accounts has your income been more than your personal tax allowance ? and have HMRC written to you in the past about this ?.

(I know about R85`s as I was involved in investor compliance until recently).

Snarf999

Yes my salary has always been above my allowance, but I've so far not been a higher rate tax payer. We've claimed child tax credits and child benefit (although no longer qualify for the former) so have had to submit information to HMRC, but I've never had communication about receiving gross interest.

antonic

OK,

If your a taxpayer cancel the R85`s and get the interest paid net.

The decision of whether you tell HMRC is up to you.

Snarf999

Sorry I should've said, Lloyds TSB corrected that today in branch, they said don't bother contacting HMRC, but to be honest I think I'm better off contacting them just in case as the amount is small, if it has to be repaid so be it. I'm just wondering that, if the mistake lies with Lloyds TSB, whether I should expect, or ask, for any compensation from them if I do have to repay.

antonic

Back in the days when I was doing investor compliance, the only way an R85 could be completed was in writing.

This leads me to think that this could be an old account you opened when you first opened it with Lloyds, and then in future you *may* have opened new accounts and NOT signed it.

Is it a lot of money we are taking about ? - if it isnt it may cost HMRC MORE to collect the underpayment than the actual value of the underpayment !.

As I said previously, if you want to `fess up - thats up to you.

Snarf999 wrote: »

Sorry I should've said, Lloyds TSB corrected that today in branch, they said don't bother contacting HMRC, but to be honest I think I'm better off contacting them just in case as the amount is small, if it has to be repaid so be it. I'm just wondering that, if the mistake lies with Lloyds TSB, whether I should expect, or ask, for any compensation from them if I do have to repay.

Snarf999

Yeah it'll be an account I've had for a long long time. The amount I owe back will probably be in the order of £100, though you're right, it'll cost them more to investigate than they'll get back. I'll ring them on Monday anyway and see what they've got to say!

antonic

I salute you on your honesty !

Snarf999 wrote: »

Yeah it'll be an account I've had for a long long time. The amount I owe back will probably be in the order of £100, though you're right, it'll cost them more to investigate than they'll get back. I'll ring them on Monday anyway and see what they've got to say!

dzug1

Snarf999 wrote: »

Sorry I should've said, Lloyds TSB corrected that today in branch, they said don't bother contacting HMRC, but to be honest I think I'm better off contacting them just in case as the amount is small, if it has to be repaid so be it. I'm just wondering that, if the mistake lies with Lloyds TSB, whether I should expect, or ask, for any compensation from them if I do have to repay.

There are actually two mistakes - LTSB for not processing things correctly, (assuming they didn't, it's not clear what actually happened), and you for not noticing.

I doubt if you have a case for compensation, though there are those who say it's always worth a try. Possibly if HMRC go for penalties, but not otherwise. After all you have gained by hanging on to the tax for up to 10 years

mulronie

Snarf999 wrote: »

I'm not sure how it's actually happened as I believe you have to register to receive interest gross and I informed Lloyds TSB that I was no longer a student in 1998 [...] Is it on Lloyds TSB for not changing over my account when I stopped being a student?

Based on this, Lloyds have made no mistake.

Your status as a student has nothing to do with your status as a taxpayer. Student or not, you get the same tax-free allowance.

It is your job to assess whether or not you will earn above the tax-free threshold in a particular year, and inform your bank appropriately if you require a change to your gross/net status. Unless Lloyds agreed, after you explictly asked them, to remove you from gross interest, it's not on them. Even if it were, their mistake would only apply for the first tax year, as of course after this you should have noticed that tax was not being appropriately deducted.

It is your responsibility to ensure that your dues to HMRC are paid.

mickael28

Snarf999 wrote: »

I'll ring them on Monday anyway and see what they've got to say!

Hiya, did you manage to contact them and see what they had to say? we're in a similar situation with Lloyds as well...