Harris & Co chartered accountants report that hundreds of thousands of extra people are expected to complete a self-assessment tax return for the first time by the end of this month, including people who have won compensation for mis-sold payment protection insurance (PPI) who are at particular risk of making errors on their returns, according to ACCA.
ACCA is warning taxpayers who have been paid any of the estimated £10bn paid out so far in PPI compensation should pay close attention to how they fill in the forms, which must be filed by 31 October.
Chas Roy-Chowdhury, ACCA head of taxation, said:’ "While the PPI compensation itself is not taxed, any interest element awarded on that sum is taxable. Failure to declare that in the self-assessment form could lead to a knock at the door from HMRC. It’s not obvious at all in completing the necessary forms."
The institute says changes to the child benefit system and a rise in the number of self-employed are behind a predicted substantial rise in the numbers of individuals who self-assess. High earners with incomes over £50,000 who continue to claim child benefit but do not complete a self-assessment form could be liable, not only to repay part of all of the benefit claimed by way of a tax charge on the highest earner of the couple, but also interest and penalties on the tax unpaid.
Roy-Chowdhury said: ‘Even those who have gone through the self-assessment process before will see some new elements to it, making what was originally meant to be an easy process much more complicated and vulnerable to mistakes. It’s not just completing the form that’s tough, its knowing what can and can’t go in that could trip you up.’