Dividends from 14/15

Tonies_2

Hi All,

In 14/15 I invested in some accumulation funds with my IFA. He never made clear and so I was unaware that the reinvested amounts in these funds also count as dividends. So I am just realising now that I had around £1500 dividends.

I was a higher rate payer on PAYE. Looks like I had around £2000 in bank interest that year but not sure if they know about this?

I am getting my documents together now to contact HMRC, but wondering what kind of response to expect? Will I be asked to complete a self-assessment? I am currently not registered for SA and have never been asked to do so. According to their guide "who must send a tax return" I think the only bullet point I hit is the "dividends - contact us if this is only reason".

Thanks all

TheCyclingProgrammer

On the face of it you probably owe about £800 in tax on the interest (unless that's the net amount after basic tax deducted by your bank, in which case £500) and if the dividend amount is also net of the 10% tax credit then a further £325 of higher rate tax due.

For the amounts involved it's very likely HMRC could collect this through your tax code although I'm not sure if it's too late for that - obviously these amounts should have been declared by October last year (and if a SA was needed this would have been due by January this year).

As you haven't actually been asked to submit a tax return you don't have to worry about the £100 for late submission (as I said you might not even need to do one) however HMRC could potentially add a penalty for late notification and you'll probably have some interest to pay too.

Best course of action would be to get the figures together and call HMRC and see what they say.

Tonies_2

Thanks. Do you maybe have a link about having no late submission penalties if I wasn't asked to complete an SA? I'm looking at the penalties now and feeling pretty worried.

As an aside, do people think that my IFA should reasonably have made me aware of new tax obligations arising from the investments they recommend? I can't believe this isn't part of their duty to their clients.

Dazed_and_confused

If you look at the front of a tax return (search SA100 on gov.uk) you will see that late filing penalties will not apply unless you file the return late. You have not been sent a return so cannot possibly have filed it late yet!

You will get 3 months from when the return is issued to file it and late filing penalties will only apply if you miss this deadline.

Note this is totally different to late payment interest. The tax should have been paid by 31/01/2016 so expect to pay interest on any tax you end up having to pay. Interest will accrue from 31/01/2016 so you may want to make a payment as soon as you get your self assessment reference number.

You probably need to look at the agreement you entered into with the ifa to decide if they have been at fault in any way? Would you expect your accountant to give you investment advice?

Tonies_2

Okay great, thank you for that.

Will sort this out first with HMRC and look back at the IFA agreement afterwards. Seems strange to me as they have been very clear to discuss capital gains, but not a word was ever said about these dividends.

Darksparkle

Late filing penalties wouldn't apply as no notice to file has been sent as yet but failure to notify penalties might apply as you didn't notify them by 5th October 2015 that you had income liable to further tax.

These penalties are based on the tax not paid at 31st January 2016 and the behaviour that led to the late notification.

If you notify HMRC ASAP (within 12 months of the tax being due) and they accept it was non deliberate you may be able to get a 0% penalty.

TheCyclingProgrammer

Darksparkle wrote: »

Late filing penalties wouldn't apply as no notice to file has been sent as yet but failure to notify penalties might apply as you didn't notify them by 5th October 2015 that you had income liable to further tax.

These penalties are based on the tax not paid at 31st January 2016 and the behaviour that led to the late notification.

If you notify HMRC ASAP (within 12 months of the tax being due) and they accept it was non deliberate you may be able to get a 0% penalty.

I agree if you come forward HMRC may waive any late notification penalty but I believe they will almost certainly charge interest on the tax due at the end of Jan 2016.

polymaff

TheCyclingProgrammer wrote: »

I agree if you come forward HMRC may waive any late notification penalty but I believe they will almost certainly charge interest on the tax due at the end of Jan 2016.

Interest is an automatic thing - whether it is owed by the taxpayer - or is owed to the taxpayer. As for penalties, there is no exhaustive definition of the legislation's term: "reasonable excuse". It seems to me, though, that there is no "reasonable excuse" in this case. The OP appears to have failed to report not just dividend, but taxable savings income, too. I'd guess that HMRC is likely to classify this as at the other end of the excuse spectrum and go for penalties - unless there are extenuationg circumstances we are unaware of (See https://www.gov.uk/tax-appeals/reasonable-excuses )

OP, the key thing is to get the facts together and then make a full declaration to HMRC - before they come after you. That is the best - perhaps the only - way of mitigating your circumstances.

Darksparkle

polymaff wrote: »

Interest is an automatic thing - whether it is owed by the taxpayer - or is owed to the taxpayer. As for penalties, there is no exhaustive definition of the legislation's term: "reasonable excuse". It seems to me, though, that there is no "reasonable excuse" in this case. The OP appears to have failed to report not just dividend, but taxable savings income, too. I'd guess that HMRC is likely to classify this as at the other end of the excuse spectrum and go for penalties - unless there are extenuationg circumstances we are unaware of (See https://www.gov.uk/tax-appeals/reasonable-excuses )

OP, the key thing is to get the facts together and then make a full declaration to HMRC - before they come after you. That is the best - perhaps the only - way of mitigating your circumstances.

OP doesn't need it to be a reasonable excuse. The OP must report it, unprompted within 12 months of the tax being due and HMRC need to consider it was non-deliberate. If so the penalty range is 0-30%.

polymaff

Tonies wrote: »

... I am currently not registered for SA and have never been asked to do so. According to their guide "who must send a tax return" ...

Don't confuse reporting via self-assessment and/or via a tax return with your absolute duty to report any income which would be liable to further taxation. If you've not declared such income to HMRC then YOU are liable for the consequences.

polymaff

Darksparkle wrote: »

OP doesn't need it to be a reasonable excuse. The OP must report it, unprompted within 12 months of the tax being due and HMRC need to consider it was non-deliberate. If so the penalty range is 0-30%.

You seem to be missing my point - that a "reasonable excuse" is the only hope of mitigation of the penalty.