What to do if you make a mistake on your tax return
There are many things you will have to get used to when becoming a director of a limited company.
Completing your personal tax return correctly can be one of the more difficult things to get a grasp of. If, however, you discover you have made a mistake when filling this out, it’s vital you act quickly to get this rectified.
Regardless of the extent of the mistake(s) or when you discover these have been made, the first thing you ought to do is to stay calm. There is little point in panicking – mistakes can, and do, happen to us all, but if you need to make amendments you ought to ensure they are resolved properly. In the event you have made an error, here is what your next step should be.
Should you discover a fault with a recently submitted tax return, you will usually have 12 months from January 31st after the end of the fiscal year to correct it. HM Revenue and Customs (HMRC) classes these as amendments.
If you submitted your tax return through the post, you will need to resend the documents you want to be reassessed back to the HMRC office, marking it as an ‘amendment’. If, on the other hand, your tax return was sent online, you should log-in to your self-assessment profile to carry out such changes.
Should it be the case you owe a greater amount of tax because of the changes made, HMRC will get in touch to let you know exactly how much is outstanding and the deadline for paying it. If you believe you have paid too much tax and are due to receive some money back, you should inform HMRC how you would like to receive this amount. The money can be paid into your bank account or be given to you as a cheque, although the latter may take longer to be processed.
Correcting mistakes more than 12 months after the submission deadline
To disclose an error on an older tax return, you need to notify HMRC of your intention to do this within four years of the end of the tax year that the return relates to. This means, for example, that if you need to make an amendment for the fiscal year 2009-10, you have until April 6th 2014 to make a request. You will need to apply in writing, setting out the period when you believe a mistake was made, your reasons why you think you have under/overpaid tax and evidence to back this up. Again, if applicable you should note how you would like to receive any money you are owed.
HMRC can charge a penalty for an incorrect personal tax return if they believe that you did not take reasonable care when calculating your tax position. ‘Reasonable care’ is assessed on a number of different factors including time frame, whether you reported the error unprompted and disclosure of information.
HMRC will always charge interest on any additional tax due from the date it should have been paid.
Obviously, it’s best to complete tax returns correctly the first time round, but if you’re a busy contractor it might be best to contact an accountancy and payroll services provider such as PayStream for assistance. Such companies can take care of much of the hassle involved with doing personal tax returns, including completing and submitting your return online, dealing with HMRC on your behalf and reminding you about important deadlines. This will free up more of your valuable time for you to work on current contracts.