Making a mistake on first preliminary tax return. Any fines?

Donald Trump

This is probably a fairly basic question.

Suppose it is your first year submitting a tax return. So your preliminary tax would have be zero according to my understanding. You neglect to put down one payment/income but you correct it by 31st Oct deadline the following year. Maybe you didn't know it at the time of filing or you were expecting some payment but weren't sure you would be paid or not.

Do you need to correct as soon as possible or is it grand once you do it before the deadline the following year? Could you get in trouble over it? I mean as in hypothetically could they come to you in April and say "your preliminary tax was wrong. We are fining you"

beauf

Fix it as soon as possible.

Not sure why you wouldn't.

Donald Trump

I might have made the first post confusing

Suppose the correction would result in no change to the amount that needed to be paid in the preliminary tax filing but would affect the final full return amount. Does it leave you open to fines? Surely the full tax return is an opportunity to fix any errors or omissions? If you underpaid your preliminary tax, then surely you'd pay the interest due, plus maybe a fine. I don't know. My question relates to the scenario where nothing is or was paid "late".

beauf

You can ring them and ask they won't bite your head off.

I suggest you read up on the preliminary tax interest the rules are pretty specific. They seem to expect you to over pay and get a refund not underpay and pay the balance later.

But your question really is that you might not get this income at all. Only you know how likely that is.

beauf

That said I think preliminary tax is dumb. I know why they want it, but still.

Donald Trump

My understanding is that you can pay either 90% of the tax due or 100% of the previous years tax (maybe that's backward). So from that I'd conclude that when you file for the first time you don't have to pay anything until you submit the full tax returns the following Oct. So even if you missed something, the interest would be on what should have been paid in preliminary tax, but wasn't, i.e. zero. But I'm just assuming that

boring accountant

Your question is very confusing.

What exactly did you do and what is it you think you should have done differently?

boring accountant

Donald Trump wrote: »

My understanding is that you can pay either 90% of the tax due or 100% of the previous years tax (maybe that's backward). So from that I'd conclude that when you file for the first time you don't have to pay anything until you submit the full tax returns the following Oct. So even if you missed something, the interest would be on what should have been paid in preliminary tax, but wasn't, i.e. zero. But I'm just assuming that

Sorry didn’t see this. Yes, that assumption is correct. When you base your preliminary tax on 100% of the prior year liability and the prior year liability is nil, preliminary tax due is nil also. You just need to file a nil declaration on ROS, which is what I assume you’ve already done.

If you’re going to use the 90% option, as always if the amount involved is significant it’s worth getting an accountant. 90% is only a worthwhile option if you have cash flow issues and your income is significantly lower than last year.

If you have income that you’re not certain will come in then you can use the 90% option but still over pay preliminary tax to leave a cushion.

mystic86

beauf wrote: »

That said I think preliminary tax is dumb. I know why they want it, but still.

In what sense, everyone else (employees) pay tax for a year in that year.

tanit

Donald Trump wrote: »

My understanding is that you can pay either 90% of the tax due or 100% of the previous years tax (maybe that's backward). So from that I'd conclude that when you file for the first time you don't have to pay anything until you submit the full tax returns the following Oct. So even if you missed something, the interest would be on what should have been paid in preliminary tax, but wasn't, i.e. zero. But I'm just assuming that

This is from the Revenue manual A Guide to Self Assessment verbatim

To avoid interest charges, the amount of preliminary tax paid for a tax year must be equal to or exceed the lower of:
 90% of your final liability for the (current) tax year, or
 100% of your final liability for the previous tax year (‘tax return’ year), or
 105% of your final liability for the pre-preceding tax year.
(This option is only available where preliminary tax is paid by direct debit and does not apply where the tax payable for the pre-preceding year was nil)

From that paragraph what you get is that the first year of assessment preliminary tax would be 90% of the final liability for the year because is the only figure that applies in that case and penalties would be calculated on the basis of the figure that should have been paid. By my experience with self-assessed clients I recommend you, you go into direct debit and pay an estimate of you liabilities. When the payment deadline arrives they always struggle/have a shock with the money they need to pay.