Tax Credit booboo concerning dividends

[NadJ]

For FY 2010-2011 I was a contractor and the director of my own Ltd company paying myself a £12k annual salary. On top of this, I paid myself a couple of thousand in dividends each month. On the annual tax credit returns form I failed to specify the dividends because I received some lousy advice from a tax credit officer to say that I do not need to declare these. It all sounds incredibly silly now but it was all new to me at the time and I didn't challenge as well as I should've, combine this with the fact that the "Other Income" box on the form mentions pretty much everything except for dividends. It could be she misunderstood the question but the answer, and I remember it vividly, was that I do not need to "worry about this". I even remember telling my wife about it at the time and we were both very surprised. If there is a recording of the phone conversation then I'm sure I'm covered and correct about what I heard.

 

About 6 months after the FY ended and after I submitted my company accounts (which of course clearly showed the dividend payments), I became very uncomfortable with the idea that I didn't need to "worry about" my dividends, so I called the support line again only to hear them confirm what I feared. So right there and then I declared that the income information provided for FY 2010-2011 was wrong and needed a major update of around some £30k! I explained the situation and was told that as the correction was for the previous period, it could take up to 3 months for someone to look into this and fix. I've chased them up twice and every time I call they do not seem concerned and have no appreciation of my desire to fix the mess. It's now 8 months on and nothing has been done. At the very least I would've expected them to drastically reduce current payments.

 

So, what do I do about this as I'm not getting anywhere with an update? I hate things like this occupying my mental state and the current system offers no feedback or case update. I really wouldn't want them to write to me in 3 years accusing me of fraud once they've linked the director dividend payments with the declared income for that year!

Edited August 21, 2012 by NadJ

[honeybee13]

Hello there.

 

I'll move this to the HMRC forum for you, which is where tax credit queries are dealt with. Someone on the site team knows about tax matters, I don't know if she's around atm but will ask her to look in.

 

My best, HB

[onlyme79]

Hi

I can't offer professional advice - but only my experience as a layman.

 

I disclosed an error I'd made in Nov 2010. They also told me that it would take 12 weeks to correct as it would go through head office. I still haven't heard anything.However, the change to the current tax year happened within about 4 weeks. I can empathise with the paranoid thoughts about getting done for fraud years later. I worry that the finer details of the disclosure/misunderstanding will get misconstrued as fraud after such a long time.

 

After months (nearly 2 years) of paranoia and reading through forums endlessly, I get the impression that making a change to a finalised tax year is a long drawn out affair. I think changes to current tax years are relatively easy for the tax credit office to update on their system.

 

I imagine there has been no change to the current tax year for you, because the money you receive in the current tax year depends on the previous 'finalised' tax year's income. I've a feeling it might be a discrepancy thing that the tax credit computer system just won't compute.

 

I've read a couple of posts now relating to overpayments from years ago being amended, and each of them happened about 5-6 years later. The tax credit manual says that their deadline for amending a tax year is 5 years following the end of the tax year to which the error relates.

I think possibly that they might just be prioritising detecting current errors in the system due to their limited resources. Maybe they see the overpayments that we will be paying back as 'already in the bank'. I know it's not great when you have ongoing worry about it - it'd be nice to know what was happening wouldn't it?

 

 

I found this post interesting:

http://www.rightsnet.org.uk/forum-archive/index4c65.html

I think it's a forum for advisors (not the general public). If you read the post by 'bensup' it suggests that 'paying them back' is definitely not a straight forward procedure. It's so frustrating.

 

Good luck with it. Please keep us updated. I will let you know if I hear anything.

Edited August 22, 2012 by onlyme79

[NadJ]

Thanks for your reply and the link