QUESTION: I am an employee and have a small side hustle that I started in the 2022/23 tax year. I knew my tax was collected by my employer on my salary, but I prepared and submitted a tax return on HMRC’s website to report my other income to HMRC and pay tax on it. I recently received a letter from HMRC stating they intend to carry out a check into my tax return. What does this mean and what powers do HMRC have?
ANSWER: An officer of HMRC can, within nine months of receiving a self-assessment tax return or a corporation tax return, amend it without opening an enquiry to correct an obvious error or omission or anything else that the officer has reason to believe is incorrect based on information already held and where no more information is needed.
‘Obvious’ means that there can be no doubt what the correct entry should be, this could include correcting arithmetical errors, transposition of incorrect figures and errors of principle.
The taxpayer (whether individual, partnership or company) has no right of appeal against a correction but does have the right to reject it by giving notice in writing within 30 days of the date it was issued by HMRC. This means that the correction has no effect, and the self-assessment is put back to the original figures.
Even if the taxpayer does not reject the correction in the time allowed, he may be in time to amend the return. In such circumstances, an officer can only dispute the amendment by means of a formal enquiry into the amended return.
An HMRC officer can enquire into a return, or an amendment made to a return, by giving written notice to the individual, sole trader, partnership or company concerned. Enquiries into self-assessment returns or amendments are launched within 12 months of the return being delivered to HMRC.
If the return was delivered after the statutory filing date, the enquiry notice must be issued by January 31, April 30 , July 31 or October 31 next following the first anniversary of the day on which the return is delivered.
Your query does not clarify whether you included detail of your salary on your tax return. Although tax has already been collected by your employer, your other income might push you into a higher tax bracket therefore your tax return must include your total income along with any tax suffered at source. That means your top-up tax payment will factor in your tax bracket along with any personal allowance (i.e. tax-free amount) already used.
In respect to the compliance check you have recently received, since you prepared your own tax return, I suggest you speak with an accountant for their opinion on whether your original submission was complete.
They will be able to draft the necessary response to HMRC and help seek an extension if you are unable to meet the deadline set by HMRC.
- KellyAnne Murtagh (kellyanne.murtagh@aabgroup.com) is senior tax manager at AAB Group Accountants Ltd (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
