Occasionally clients come to us with some real horror stories to unravel, after submitting tax rebate claims themselves. Despite the mass of information provided by HMRC and their encouragement to deal with our tax affairs online, tax refunds still often need input from an expert. They are rarely as straightforward as they first seem especially if you are trying to claim for expenses like capital allowances for tools.
The good news when claiming a tax rebate
We invest in our free income tax and tax rebate guides, tax refund calculators and blog articles because we believe that all taxpayers should have access to the information they need about our tax system. And it’s great to see the numbers of legitimate claims rising year on year. The tax relief payments you are entitled to shouldn’t be sitting in HMRC’s bank account.
But we also advise caution when tackling the actual claiming process itself. Mainly because there are hefty financial penalties from HMRC when claims go wrong.
Why can’t I just fill in the form myself?
Lots of people think that because their situation appears to be the same as their friend or colleague, they can submit exactly the same tax refund claim. You can go ahead and make a claim for work and travel expenses. But you need to be prepared for all the consequences of getting it wrong. And just making a mistake carries a fine.
As Alexander Pope said: “A little learning is a dangerous thing”. You may know that your industry can claim for tools and equipment bought for work and that you can claim mileage on your travel. But do you know what evidence you need to support your claim (for example receipts or other forms of proof of purchase)? Have you made sure that you are claiming for everything you are eligible for?
The more elements included in your tax refund claim, the more you need to get into the details. This requires time and knowledge of HMRC’s regulations for tax reliefs and allowances. And it means that there is a greater risk of there being mistakes in a claim you put together without any expert help.
What if your tax rebate claim is investigated?
HMRC have a random spot check policy. What would happen if you were suddenly identified to be part of that? This could happen even if your claim itself doesn’t raise any issues. You’d need all the supporting evidence for your tax refund claim. Or, if it wasn’t to hand, you’d need to know how to get it and where to get it from.
Likewise, if HMRC have questions about your claim, or they identify a mistake, you will need to provide answers to their investigation.
Sometimes people just repay any refund they received because it’s quicker, less stressful and cheaper than challenging an HMRC enquiry.
The financial penalties are particularly severe if HMRC suspect that you may be deliberately trying to avoid tax by defrauding the tax refund system. If you have underpaid your tax bill, at a bare minimum HMRC will ask you to pay the correct amount. The Tax Office may deem your claim to be “careless”, which carries a fine of between 15% and 30% of your overall tax bill. They also charge a daily interest rate on any money you owe them starting from your original tax bill’s deadline. As a very worst case scenario, HMRC bring criminal charges against people for tax avoidance and evasion.
Remember, you are liable for your tax position, even if you have paid someone else to submit claims for you. There are professional scammers pretending to be tax professionals out there. They get an individuals’ details, submit fake claims and have the payments come directly from HMRC to them so they can simply steal the money. This also leaves you with a fraudulent claim in your name.
Tony Shanks