I made a mistake on my tax return; what now?

Posted on By Louise Polcaro
mistake,tax return,hard

Mistakes are part of life. No one likes to make them and it always feels better once they are corrected. Mistakes with your tax can seem daunting, but they can always be fixed.

If you failed to submit a tax return

If you failed to submit a tax return then the first question to ask is ‘did HMRC ask you to submit tax returns for all the year(s) you are worried about’? If so, then you may be able to fill them in and submit them anyway.

The filing date for an online tax return is currently 31 January after the end of the tax year. You can submit personal tax returns for up to three years after the filing date. HMRC will charge you late payment interest and penalties as well as the tax.

Making a voluntary disclosure

If you have more years’ returns to submit, never received any communication from HMRC asking you to submit tax returns or realised that you did not include all your income, profits or gains in your tax return then you need to make a ‘voluntary disclosure’.

A voluntary disclosure is a process by which you tell HMRC what income, gains and profits need to be taxed so that they can assess what you owe before you pay the tax and any late payment interest. Depending on what went wrong, you may also need to pay some penalties.

Making a voluntary disclosure before HMRC finds out and opens an enquiry or investigation usually results in lower tax-geared penalties and minimises the risk of prosecution or having your details published. It is often a simpler process too, compared to a full investigation.

Don’t think HMRC will find out? Think again…

If you doubt HMRC will find out – think for a moment about HMRC’s new computer system called CONNECT, which holds data on everyone including details of bank interest, salaries, etc. Soon this will automatically annually receive data on bank interest and balance from banks outside the UK. The computer identifies people for HMRC to investigate.

Seek help

As soon as you realise you need to correct your tax affairs, appoint an experienced advisor who is used to helping people in situations similar to yours. They will advise you on your options for making a disclosure, depending on your specific situation and why the problem arose.

Tax rules are complicated, so please get advice rather than trying to use HMRC’s Digital Disclosure Service yourself. An advisor can also guide you as to what penalties to expect and whether you may be able to get them suspended, as well as resolving other related issues, VAT issues, for example. They should also be able to negotiate time to pay if you cannot afford to pay HMRC in full immediately.

Helen Adams TEP is Tax Principal at BDO LLP in London, UK

I am getting re-married – will my children still inherit?

Posted on By admin
remarriage

Many people don’t know that when you get re-married your existing will becomes null and void, so you will need to make a new one if you wish to ensure your loved ones are provided for if you die. (NB this is the case in England and Wales and Northern Ireland; it’s different in Scotland – see section below.)

If you don’t have a will, your estate will be distributed under the rules of intestacy, which direct that your spouse will automatically inherit the first £250,000 of your estate and all of your personal possessions. There are more complicated rules if your estate is valued over £250,000, depending on which of your relatives are still alive. (There is a useful tool on GOV.UK to work out who inherits if someone dies without a will.)

This may mean your children will not inherit as much as you would like them to, so it is essential to arrange a new will as soon as practicable after you have re-married. You can, in fact, make a will in anticipation of getting married, in which case your advisor will incorporate a clause stating that the will should be read as though you are already married. However, you may find it simpler to make your new will as soon as possible after you are married.

Providing for your family

If you have children from your first marriage, then you will probably want to make sure that your children and your new spouse and perhaps any step children are provided for in the event of your death. You may wish to consider setting up a trust in your will that will allow your second spouse to benefit from your assets during his or her lifetime with the certainty that your children will receive the assets later on.

Having experienced the breakdown of your first marriage, you may wish to put some plans in place in case this second marriage doesn’t last. A prenuptial agreement would enable you to protect some assets for your children if your marriage breaks down.

Home ownership

If you own your matrimonial home as joint tenants it may be more appropriate to change the ownership to tenants-in-common so that you have greater control over who should inherit your share of the property if you die. With a tenants-in-common ownership your share passes into trust on your death rather than automatically passing to your second spouse.

If you do this you should draw up a Declaration of Trust that sets out each co-owner’s stake in the property so that your children will inherit the right amount. You can also stipulate whether the surviving partner would have the right to continue to live in the property until they pass away or wish to sell. Without this in place, your partner may be forced to sell the property in order to give your children their inheritance.

NB: Home ownership options are similar but with slight variations in terminology and process across the UK. You can find out more in our article: ‘Should we own our home as joint tenants or tenants-in-common?’

Proper planning

Planning for all eventualities can be complex, so it is important to speak to a qualified advisor to make sure you have covered all bases. With proper planning you can ensure that your second spouse and your children are both protected and maintain control over how your assets are distributed on your death.

What about in Scotland?

In Scotland, your will is not revoked upon marriage but it is still important to review your will to ensure everyone you want to provide for is included. In addition, Scotland has different rules in relation to inheritance, with a spouse/civil partner and children entitled to a ‘legal right’ to inherit a set portion of your estate.