Interest reported to HMRC in wrong year

Yorkshire_Pud

I’m shocked, or am I, that such confusion is allowed to carry on year after year when the people who are supposed to run the system, banks and HMRC seem to be saying it’s not us it’s them resulting in, as usual, the poor old tax payer having to battle to sort out the mess the system creates.

MinstrelWelly

Called HMRC again today, and I finally got through to someone who knew of the issue, and advised that I send a statement and Terms & Conditions for each affected bank account, with a covering letter, to HMRC. She said she couldn't make the required changes over the phone.

So, that's a positive - I have a way of potentially resolving the issue.

Just highlights, though, that HMRC know they're getting it wrong, but haven't resolved it. All it needs is for the spreadsheet which banks use to report interest to include a column for the year that the interest is taxable. Would also require some software changes for the banks, to populate that column, so its not trivial, but its far from rocket science.

Kim_13

MinstrelWelly said:

Called HMRC again today, and I finally got through to someone who knew of the issue, and advised that I send a statement and Terms & Conditions for each affected bank account, with a covering letter, to HMRC. She said she couldn't make the required changes over the phone.

So, that's a positive - I have a way of potentially resolving the issue.

Just highlights, though, that HMRC know they're getting it wrong, but haven't resolved it. All it needs is for the spreadsheet which banks use to report interest to include a column for the year that the interest is taxable. Would also require some software changes for the banks, to populate that column, so its not trivial, but its far from rocket science.

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer. But until HMRC issue them with different instructions they can't do anything else, even though they would probably prefer to do that as they must have a number of customers asking them only to report when the interest is taxable and potentially deciding to shoot the messenger when they don't like the response.  

eskbanker

Kim_13 said:

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer.

But they don't have to provide tax certificates to customers anymore - they used to have to do this when they were deducting tax at source up to 2016, but now that taxation has been decoupled from interest payment, the requirement to issue tax certificates fell away.

As above, some will still choose to issue similar documents for convenience but to the best of my knowledge these only record 'interest paid' rather than 'interest paid that'll be subject to taxation (by another body)'....

poseidon1

eskbanker said:

Kim_13 said:

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer.

But they don't have to provide tax certificates to customers anymore - they used to have to do this when they were deducting tax at source up to 2016, but now that taxation has been decoupled from interest payment, the requirement to issue tax certificates fell away.

As above, some will still choose to issue similar documents for convenience but to the best of my knowledge these only record 'interest paid' rather than 'interest paid that'll be subject to taxation (by another body)'....

As I indicated on another related thread all of my banks ( 16) supply certificates either online (15) or on request ( 1) - see below

https://forums.moneysavingexpert.com/discussion/6641705/obtaining-bbsi-from-hmrc#latest

I  established with @masonic that a couple of banks  he believed did not supply, do but it was just a matter of navigating online where they were stored.

My impression, therefore is the vast majority do supply ( online at least) it's just knowing where and how to look.

I self assess by the way ( 14 years now) based solely on the certificates supplied, and never had HMRC query my bank interest reporting.

eskbanker

poseidon1 said:

eskbanker said:

Kim_13 said:

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer.

But they don't have to provide tax certificates to customers anymore - they used to have to do this when they were deducting tax at source up to 2016, but now that taxation has been decoupled from interest payment, the requirement to issue tax certificates fell away.

As above, some will still choose to issue similar documents for convenience but to the best of my knowledge these only record 'interest paid' rather than 'interest paid that'll be subject to taxation (by another body)'....

As I indicated on another related thread all of my banks ( 16) supply certificates either online (15) or on request ( 1) - see below

https://forums.moneysavingexpert.com/discussion/6641705/obtaining-bbsi-from-hmrc#latest

I  established with @masonic that a couple of banks  he believed did not supply, do but it was just a matter of navigating online where they were stored.

My impression, therefore is the vast majority do supply ( online at least) it's just knowing where and how to look.

I self assess by the way ( 14 years now) based solely on the certificates supplied, and never had HMRC query my bank interest reporting.

OK, but my point was really that they're not obliged to, and that they no longer fulfil the original purpose of documenting tax deductions, i.e. they're now just annual interest statements rather than tax certificates as such, in that they're simply recording the amount of interest paid over a tax year rather than defining anything about the tax liabilities arising from those payments.

masonic

Kim_13 said:

MinstrelWelly said:

Called HMRC again today, and I finally got through to someone who knew of the issue, and advised that I send a statement and Terms & Conditions for each affected bank account, with a covering letter, to HMRC. She said she couldn't make the required changes over the phone.

So, that's a positive - I have a way of potentially resolving the issue.

Just highlights, though, that HMRC know they're getting it wrong, but haven't resolved it. All it needs is for the spreadsheet which banks use to report interest to include a column for the year that the interest is taxable. Would also require some software changes for the banks, to populate that column, so its not trivial, but its far from rocket science.

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer. But until HMRC issue them with different instructions they can't do anything else, even though they would probably prefer to do that as they must have a number of customers asking them only to report when the interest is taxable and potentially deciding to shoot the messenger when they don't like the response.  

As I understand it, that would require a change to the Taxes Management Act and therefore parliamentary time to remove the legal obligation to report annually all interest credited. HMRC probably could of its own volition add a field to the existing form.

poseidon1

eskbanker said:

poseidon1 said:

eskbanker said:

Kim_13 said:

Or for banks to simply report interest when it is taxable and not when it is credited. Presumably they already have a system to do this given the tax statements they have to provide to the customer.

But they don't have to provide tax certificates to customers anymore - they used to have to do this when they were deducting tax at source up to 2016, but now that taxation has been decoupled from interest payment, the requirement to issue tax certificates fell away.

As above, some will still choose to issue similar documents for convenience but to the best of my knowledge these only record 'interest paid' rather than 'interest paid that'll be subject to taxation (by another body)'....

As I indicated on another related thread all of my banks ( 16) supply certificates either online (15) or on request ( 1) - see below

https://forums.moneysavingexpert.com/discussion/6641705/obtaining-bbsi-from-hmrc#latest

I  established with @masonic that a couple of banks  he believed did not supply, do but it was just a matter of navigating online where they were stored.

My impression, therefore is the vast majority do supply ( online at least) it's just knowing where and how to look.

I self assess by the way ( 14 years now) based solely on the certificates supplied, and never had HMRC query my bank interest reporting.

OK, but my point was really that they're not obliged to, and that they no longer fulfil the original purpose of documenting tax deductions, i.e. they're now just annual interest statements rather than tax certificates as such, in that they're simply recording the amount of interest paid over a tax year rather than defining anything about the tax liabilities arising from those payments.

I take your point , but referring back to the OPs concerns, such certificates if they mirror the banks BBSI reporting, should provide a useful basis to cross check HMRC's figures. Certainly in the OPs case obtaining the certificates from his own bank should give him visibility of what HMRC are working with.

I personally don't know for a fact that the mirroring is precise,  since as i said   I have had no reason to dispute HMRC, since my tax calculations are what they invariably accept ( rather than the other way around).  I use third party tax filing software by the way.

Appreciate most people wish to avoid self assessment at all costs, but in this regard it has its benefits.

Albermarle

Yorkshire_Pud said:

I’m shocked, or am I, that such confusion is allowed to carry on year after year when the people who are supposed to run the system, banks and HMRC seem to be saying it’s not us it’s them resulting in, as usual, the poor old tax payer having to battle to sort out the mess the system creates.

I think in reality most taxpayers/savers would be totally oblivious to the whole situation ( commentators on this forum would not be representative of the general public), or would just assume that taxing the interest annually is the correct way. 
Also for most people with fixed term accounts, the interest being taxed annually rather than in one big lump is a positive advantage, (although again most would not have a clue either way) . However some people will be aware of what's going on, but are quite happy because it suits them. 
So I would think the number of people having to 'battle to sort out the mess' is probably not that many. 
Which may be a reason that nothing will change. Although presumably HMRC are losing some revenue, so that might spur them along.

Riedel

Minstrel Welly - I'm pleased to read that you're finally getting somewhere with HMRC.  The original suggestion that you contact the bank to ask them to change their figures displayed a total lack of understanding.  It is, of course, a problem that HMRC rely upon the figures submitted by the banks but those figures don't necessarily align with HMRC's (puzzling?) interpretation of the case law on when interest 'arises' for tax purposes.  (Let's not go down that road!)

The fact is that Simple Assessments come with a statutory appeal process, summarised here: https://www.gov.uk/check-simple-assessment.   The underlying statute is at section 31AA Taxes Management Act 1970.  It's a two-stage process with an initial 'right to query' - within a specified time-limit - which then leads to a right to appeal if you're not happy with the outcome.  Ultimately your appeal could be heard by the tax tribunal.  So, it was never a case of 'get the bank to change their figures or lump it'!

Armed with the terms and conditions of your account/s and HMRC's own published guidance, it's difficult to see how the latter will maintain their stance.  Of course, if it's a three-year bond they'll doubtless over-assess you for Year 2 and then under assess you in Year 3.  One way around that would be to register for self-assessment and submit your return well before you usually receive your simple assessment.  Provide a full explanation in the 'additional information' box and hopefully you won't be bothered again.  (Ever the optimist.)