If you make an unjustified tax deduction claim

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    If you make an unjustified tax deduction claim

    What actually is likely to happen if you claim something as tax deductible in your returns form when actually it isn't, say if you claim it as a revenue expense when actually it's capital?


    Thanks,
    Hereward

    #2
    Self -loathing &certain knowledge Heaven is unattainable. Failed the Wake's mmemory.
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

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      #3
      In addition to paying the extra tax, HMRC could levy interest & penalties.

      HMRC might start an Enquiry into the whole of the Tax Return - possibly extending it to previous years (up to 20 years).

      Comment


        #4
        Thanks a lot, King_maker!

        So I'd better research any grey areas carefully, not just interpret optimistically.



        Hereward

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          #5
          I would agree, if the amount(s) involved are significant.

          Comment


            #6
            Thanks again. So a little favourable interpretation of the law would probably be okay for small amounts?

            If there's a doubt, they ask to see evidence, and judge accordingly, yes? I'm thinking that at that stage if they see receipts they might just say 'sorry, it's capital, not revenue' and ask for the extra, rather than treating you as breaking the law and imposing a penalty?



            Hereward



            Hereward

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              #7
              Originally posted by Hereward View Post
              What actually is likely to happen if you claim something as tax deductible in your returns form when actually it isn't, say if you claim it as a revenue expense when actually it's capital?


              Thanks,
              Hereward
              http://www.theguardian.com/money/201...questions-hmrc

              "The penalties are calculated on a published scale which takes into account the behaviour of the taxpayer. The penalty is therefore significantly higher if the failure to disclose is deliberate, and even higher if there is an attempt to conceal the lack of disclosure," say Fernie and Herring, who add that, typically, the penalty will add another 35%-100%.

              Warburton says while penalties can be up to 100% of the tax due, in practice they will be less than this, depending on the circumstances. "An inadvertent mistake will suffer a light penalty," he adds.
              • How many formal tax investigations did HMRC carry out last year? The Revenue's figures indicate a big fall in tax investigations into individuals' affairs – from 164,478 in 2005-06 to 111,863 in 2008-09. That is around one in 540 people in the UK.
              It is a self assessment, you aren't supposed to be a tax expert. Just fill it out as honestly as you can and don't lose sleep over it.

              (I use an accountant myself but still lose sleep over it!)

              Comment


                #8
                Best thing is to get an accountant. Then it's his call whether something is allowable or not.
                To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

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                  #9
                  Originally posted by Hereward View Post
                  So a little favourable interpretation of the law would probably be okay for small amounts?

                  If there's a doubt, they ask to see evidence, and judge accordingly, yes? I'm thinking that at that stage if they see receipts they might just say 'sorry, it's capital, not revenue' and ask for the extra, rather than treating you as breaking the law and imposing a penalty?
                  Possibly - except HMRC are currently targeting landlords (Income Tax & CGT) and interest & penalties are an easy way of increasing tax revenues.

                  Comment


                    #10
                    Thanks a lot folks!

                    Very useful Guardian article, Boletus.

                    As my income is low and there's only one property in question an accountant's fees would be a large proportion of the overall amount of tax I'll be paying.



                    Hereward

                    Comment


                      #11
                      The accountant's fees are allowable as a revenue expense against tax.

                      Not paying tax is different (from an HMRC point of view) than paying the wrong amount in the wrong category. The "rules" are actually guidelines for tax inspectors made public - and tax inspectors have wide discretion.

                      There's a vast difference between thinking something is capital but trying a revenue claim to see if it passes, and genuinely thinking something is revenue and being wrong. Don't think that HMRC will be checking your return for you, They check a number at random and others that are flagged as odd in some way.

                      If you document your thinking clearly (and don't try to claim twice) unless it's just plainly wrong (a new extension you claim as revenue) you might simply be asked to correct the error. Most repairs and replacements contain some element of improvement, and, hopefully, HMRC will remain focused on people who pay no tax rather than people who pay some tax and make the odd mistake.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Thanks a lot, JP - most helpful!



                        Hereward

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