Interest reported to HMRC in wrong year

eskbanker

poseidon1 said:

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.

In principle there should be no variance between the annual interest figures obtained by totting up individual monthly statemented values, versus any annual statement/certificate, versus the BBSI version - anecdotally there have been reports of errors causing discrepancies, e.g. Zopa reporting ISA interest as taxable, and NS&I reporting payments close to the year boundary on the wrong side of it, but such edge cases ought to be rare.

MinstrelWelly

Thanks for the link. I was aware of the query / appeal process, and that you have 60 days to query, but I hadn't found that link.

gt94sss2

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'.

HMRC will rely on the figures you declare in a self assessment over those supplied via BSSI returns.

Dazed_and_C0nfused

gt94sss2 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'.

HMRC will rely on the figures you declare in a self assessment over those supplied via BSSI returns.

But they do have the power to open an enquiry into Self Assessment returns and question what has/hasn't been declared.

Although not every enquiry will result in a change to the Self Assessment return that has been filed.

masonic

Dazed_and_C0nfused said:

gt94sss2 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'.

HMRC will rely on the figures you declare in a self assessment over those supplied via BSSI returns.

But they do have the power to open an enquiry into Self Assessment returns and question what has/hasn't been declared.

Although not every enquiry will result in a change to the Self Assessment return that has been filed.

One should always have the supporting information available to defend the figures declared. Meaning in this case the terms of the account that were agreed at the conclusion of the savings account application.

Though over multiple threads on this topic over the years I don't think there has been a report of an enquiry being opened for this reason. It is of course possible it could be looked at if HMRC took an interest in an individual for other reasons, or if the scale of the discrepancy was particularly large.

Riedel

HMRC's systems will collate the information returned by the banks in respect of a particular individual and compare this with the figures on his or her return.  This will flag up any discrepancy but I'd like to think that there is still some human intervention before a return is taken up for enquiry.  This is where the importance of providing additional information comes in.  You can use a schedule to show the interest which has been credited in the year (which will hopefully match the figures supplied to HMRC) and then make additions and/or subtractions to arrive at the interest arising in the year.  I've been doing this on my mother's returns for a few years and so far her figures have not been challenged.  I always include an explanation of my reasoning on the following lines:

"There is no access to the funds held in... (name of account/s)...until maturity. HMRC's interpretation of the law – as set out in SAIM2440 - is that interest on such accounts is deemed to arise for tax purposes in the year of maturity.  So, although interest has been credited to the account/s in this tax year, I shall be returning it in a later year in accordance with HMRC's published guidance."

Of course, you'll need to tweak the explanation where you are returning more interest than has been credited in the year, i.e. in the year of maturity.

Ocelot

They've done the same to me for the last 9 years. When you phone up they just say write in, when you write in they ignore your letter.

Doing a tax return is the only way to resolve it.

masonic

Riedel said:

HMRC's systems will collate the information returned by the banks in respect of a particular individual and compare this with the figures on his or her return.  This will flag up any discrepancy but I'd like to think that there is still some human intervention before a return is taken up for enquiry.  This is where the importance of providing additional information comes in.  You can use a schedule to show the interest which has been credited in the year (which will hopefully match the figures supplied to HMRC) and then make additions and/or subtractions to arrive at the interest arising in the year.  I've been doing this on my mother's returns for a few years and so far her figures have not been challenged.  I always include an explanation of my reasoning on the following lines:

"There is no access to the funds held in... (name of account/s)...until maturity. HMRC's interpretation of the law – as set out in SAIM2440 - is that interest on such accounts is deemed to arise for tax purposes in the year of maturity.  So, although interest has been credited to the account/s in this tax year, I shall be returning it in a later year in accordance with HMRC's published guidance."

Of course, you'll need to tweak the explanation where you are returning more interest than has been credited in the year, i.e. in the year of maturity.

I probably would have done something like this if I'd thought of it, but all my prior returns were submitted without explanatory notes, and so far so good over the last ~10 years.

2025/26 will be the last tax year in which I have interest credited internally to any of my multi-year fixes, so beyond that my numbers should start to match HMRC's data.

MinstrelWelly

MinstrelWelly said:

I've just found that Paragon and JN Bank have both reported interest to HMRC in 24/25 that isn't taxable until 26/27 (because its been added to a fixed term savings account). Consequently, that interest will be taxed in 24/25, which is going to cost me about £600 in incorrect tax. Not sure if all banks are the same, or its a problem with just some banks.

I've spoken to HMRC, who obviously could talk to the banks, and ask them to report the figures correctly, and solve the problem for all those affected, but they're not interested, and tell me I've got to contact the bank to get my figures corrected.

I've spoken to Paragon, who just say that their process is to report interest in the year its credited, not the year in which tax is due.

I'm still awaiting a response from JN Bank.

This leaves me with several questions

1) Is the correct process for the banks to report interest in the year that its due, rather than the year its credited (or are they supposed to report in the year credited, but tell HMRC which year its taxable in)?

2) Do any of the banks get this right? I.e. are all banks getting it wrong, or have I just got unlucky with my choice of banks?

3) How can I proceed from here? Neither HMRC, nor the banks, perceive a probem, or at least, its not there problem. How can I get my tax corrected? At the moment, my only thought, is to raise a formal complaint with each of HMRC/Paragon/JN. HMRC for not ensuring that the banks are reporting correctly, and the banks for not reporting correctly (but it would help to be absolutely clear what the banks are supposed to be reporting)

Many thanks for all the replies. I've decided to go down the self-assessment route, and hope that HMRC don't query my interest figures (while keeping evidence to justify them). Self assessment done within a couple of hours, and it was _so_ much less stressful than doing simple assessment, and repeatedly waiting for HMRC to get it wrong, and then trying to get them to put it right.

Annemos

I had not seen your Posting when I posted mine, MinstrelWelly. 

(I have posted about the differing tax rate between 26/27 and 27/28, which is now affecting these Bonds, too.)

You are making me think I should also do a self-assessment, as this type of issue also stresses me out. 

(Once before, HMRC had tried to change my notice of coding wrongly and the phone calls got into such a tangle, the only way it was resolved was through a Complaint.) 


https://forums.moneysavingexpert.com/discussion/6646703/fixed-rate-non-isa-bonds-straddling-2-tax-years-new-22-per-cent-tax-rate-on-interest#latest