Interest reported to HMRC in wrong year

MinstrelWelly

So, I contacted HMRC again today, to try to get the interest taxed in the correct year. After the customary hour's wait on hold, I was told that its up to the banks to report interest correctly. I pointed out that it was reported correctly, but was being taxed in the wrong year, and he put the phone down on me. This is the HMRC we know and love.

masonic

MinstrelWelly said:

So, I contacted HMRC again today, to try to get the interest taxed in the correct year. After the customary hour's wait on hold, I was told that its up to the banks to report interest correctly. I pointed out that it was reported correctly, but was being taxed in the wrong year, and he put the phone down on me. This is the HMRC we know and love.

This is the same HMRC that used to run a forum for people to make general queries, which was shut down, I'm sure not at all related to similar questions being asked there that they could not adequately answer.

You may have more joy writing to them.

MinstrelWelly

There was a suggestion that I move from Simple Assessment to Self Assessment, which would allow me to report the correct interest figures. My understanding is that that won't work, because HMRC will compare my figures with those reported by the banks, and issue a 'correction'.

masonic

MinstrelWelly said:

There was a suggestion that I move from Simple Assessment to Self Assessment, which would allow me to report the correct interest figures. My understanding is that that won't work, because HMRC will compare my figures with those reported by the banks, and issue a 'correction'.

I've been self assessing for about a decade and that has never happened to me. There would have been significant differences in some years.

MinstrelWelly

masonic said:

MinstrelWelly said:

There was a suggestion that I move from Simple Assessment to Self Assessment, which would allow me to report the correct interest figures. My understanding is that that won't work, because HMRC will compare my figures with those reported by the banks, and issue a 'correction'.

I've been self assessing for the best part of a decade and that has never happened to me.

Have the bank reported figures ever differed from your own, enough for them to not write it off (e.g. due to interest being reported in the year its credited, rather than the year that tax is due on it, as in my case, or perhaps because you happen to know that the figures you provided were inacurate?)

masonic

MinstrelWelly said:

masonic said:

MinstrelWelly said:

There was a suggestion that I move from Simple Assessment to Self Assessment, which would allow me to report the correct interest figures. My understanding is that that won't work, because HMRC will compare my figures with those reported by the banks, and issue a 'correction'.

I've been self assessing for the best part of a decade and that has never happened to me.

Have the bank reported figures ever differed from your own, enough for them to not write it off (e.g. due to interest being reported in the year its credited, rather than the year that tax is due on it, as in my case, or perhaps because you happen to know that the figures you provided were inacurate?)

I have always provided accurate figures for interest arising for tax, but I know the banks have reported all interest credited (which they are required to do).

Yorkshire_Pud

If banks report interest annually on an account that only pays out the total interest at maturity say four years later does the bank report the TOTAL interest paid out on maturity in ADDITION to the annually reported interest or just the amount for the final year, I.e. a quarter of the total roughly? If the former you’d appear to HMRC  to have received almost double the interest you actually received?

MinstrelWelly

Yorkshire_Pud said:

If banks report interest annually on an account that only pays out the total interest at maturity say four years later does the bank report the TOTAL interest paid out on maturity in ADDITION to the annually reported interest or just the amount for the final year, I.e. a quarter of the total roughly? If the former you’d appear to HMRC  to have received almost double the interest you actually received?

I suspect they would just report the final year's interest in the final year (although I haven't reached that scenario yet). The issue isn't that too much interest is being reported in total, its that each year's interest is being reported in the year it's credited (which is what the banks are asked to do), but HMRC wrongly assume that its taxable in the year that its reported. That leaves you overtaxed if it takes you over your interest tax-allowances in the year its reported, when it wouldn't if it were properly allocated to the year when it is (should be) taxable.

masonic

Yorkshire_Pud said:

If banks report interest annually on an account that only pays out the total interest at maturity say four years later does the bank report the TOTAL interest paid out on maturity in ADDITION to the annually reported interest or just the amount for the final year, I.e. a quarter of the total roughly? If the former you’d appear to HMRC  to have received almost double the interest you actually received?

The requirement is to report the interest that was credited in each tax year, which is not the correct way to calculate the tax liability. So in this case HMRC would get it wrong and the taxpayer would have to correct all 4-5 tax years of the account term.

fuzzzzy

There is also the slightly grey area of the multi year fixes where the provider offers the opportunity to change interest payment instructions throughout the term, either online or by phone, to either compound or pay out. I am still not entirely sure in these circumstances if you choose to compound that the interest is deemed to be inaccessible for that tax year, although I have a sneaking suspicion that it probably is deemed inaccessible until maturity.