Underpaid tax on savings interest for 18/19, how to resolve?

[solange]

Hi Guys

Just wondered if someone could help.

Doing my 19/20 accounts, I have just realised I have underpaid tax on saving interest for my 18/19 accounts. My error was down to miscalculation of the s24 impact (I find it quite confusing, hope I'm not the only one!). Anyhow it is £140 tax due. I submit my tax returns using third party software.

However I have been told 2 different things by 2 different accountants on how to rectify this....

First says: as the amount is insignificant just amend your 19/20 accounts to adjust for the amount owing.
Second says: you still have time to resubmit you an amended 18/19 accounts so do that straightaway.

Any one had any experience/thoughts?

[someone]

I am not an accountant.

I believe, by law, you MUST correct your previous TR. To knowingly submit an incorrect tax return this year, even if it's in HMRCs favour, is an offence. I'm not saying that people don't "do the right thing and correct their tax paid" by adjusting their current year to include missing income in a previous year but I'm surprised that an accountant would advise that.

At worst, by submitting a correction to HMRC you will get a penalty for a careless submission - which will be a percentage of the tax at stake plus interest on the underpaid tax. I'd guess that HMRC will probably waive that unless it's something you've regularly done.

If you can still amend online I'd do that straight away. If you cannot, I'd write to HMRC telling them which box was wrong (and why)

You might also want to pay the outstanding tax straight away. The interest isn't a lot but that will stop it accruing. When I had an underpayment one year it took three goes to actually "catch up" with the interest. I paid the tax, then got another bill for the interest (for about 1GBP), paid that with my next payment to HMRC and got yet another bill for 1p of interest on the interest (which I paid when I made my following payment to HMRC)

(It probably cost HMRC 50p to post the letter to me saying that I owed them 1p of interest!)

[solange]

Thanks for your kind reply someone, your £1 and 1p made me chuckle.

Interestingly, I have just found this online from an established accountancy firms website....

'the Chartered Institute of Taxation (CIOT) has a recommended threshold of £200 tax impact (as an isolated issue) before a amendment to a tax return is required (instead, the following year’s tax return can be updated)

So I investigated further on the CIOT website and found this....
'Is the irregularity trivial?

As a general principle all known irregularities should be corrected (save for non-material adjustments as described above). In the opinion of the professional bodies it is reasonable for a member to take no steps to advise HMRC of isolated errors where the tax effect is no more than minimal, say up to £200, as these will probably cost HMRC and the client more to process than they are worth to the Exchequer.'

https://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation/pcrt-helpsheet-5#trivial

Any thoughts, do you tax specialists out there agree with this?

[pawncob]

There isn't a de minimis amount in law, but practicalities dictate that it ain't worth the candle for small amounts. I would adjust it next year if you need to salve your conscience, otherwise ignore it.

[solange]

Thanks so much (once again ) pawncob

[bd6759]

You correct the return which is wrong. You do not compound the error by submitting another incorrect return.

You have until 31 Jan to amend it. It’s a simple process and probably easier than trying to manufacture a figure for a later year.

[solange]

Thanks for replying bd6759. Yes agree, it is simpler to amend exisitng return.