How to tell HMRC about an error in your tax return

If you?ve overlooked income you should have declared to HMRC or made a mistake in your or your company?s tax return, you need to put it right. Should you just send a letter explaining the position or is there a better alternative?

Errors and oversights

Mistakes on tax returns happen for many different reasons. You might, for example, have overlooked income or misunderstood the rules and claimed too great a tax deduction. The error might not be your fault at all, say, because it was caused as a result of being given incorrect information by a third party. Whatever the reason, if the mistake results in you owing further tax you should tell HMRC and pay what?s due.

Dear HMRC…

You can write a letter to HMRC explaining what went wrong, why and providing the correct information along with a calculation of the extra tax payable.

Tip.?If the mistake was in the tax return you submitted for 2015/16 or 2016/17 you don?t have to do this. All you need do is send the correct information either in a letter or by submitting an amendment to your tax return, and pay any additional tax you owe.

Tell them online

You can also use HMRC?s digital disclosure service (DDS). The ?digital? aspect to this service is that you can only access it through your online tax account. Using the DDS won?t gain you any brownie points with your local tax inspector, but it does have some advantages.

Tip.?The DDS provides you with special HMRC references for communications about the error and for paying the extra tax you owe. This means it won?t get caught up with your other tax payments, which could be a nightmare to sort out.

Which taxes?

You can use the DDS to report mistakes in return forms for income tax, capital gains tax, NI contributions and corporation tax. There are other ways to report errors for other taxes or where HMRC is running a special campaign.

Two-step process

Part one.?The first step for DDS is notifying HMRC that you need to report one or more errors. This is done via your tax account. It involves completing an online form with basic information after which HMRC will provide you with the special disclosure references.

Tip.?If you would prefer your accountant or tax advisor to handle the matter they can use the DDS on your behalf. In fact, unless the error is simple and involves little tax we recommend it. If you choose to do it yourself, it?s important that you notify your accountant about what you?ve done.

Part two.?When HMRC gives you the references you have 90 days in which to send details of the mistakes with a calculation of the tax and penalties payable. You should pay these at this stage, but if you can?t afford to, HMRC can agree to instalments.