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Savings Bonds - Interest Paid at Maturity

ARM266ARM266 Just JoinedRegistered Posts: 1
I have just received a letter from HMRC questioning a clients Savings Interest on his 2011/12 return.

Apparently he has a savings bond with interest payable at maturity. On inquiry, the interest is actually added annually but then re-invested back into the bond. HMRC advise that the bank is not required to advise him of this interest, it is his job to request the requisite statement and include it in his return. However, it does seem inequitable if he is penalized for not including it when he did not know of the interest's existence and, also, seems inequitable for it to be counted as income, and therefore to have to pay tax on it, when he doesn't have access to said 'income'.

I would be grateful for colleagues comments.

Comments

  • SarahJSSarahJS Trusted Regular Registered Posts: 273
    He SHOULD have known about the interest as he signed up for the bond! I agree it seems unfortunate that he has to request the statement, but it is definately interest even if it is reinvested (I bet it was a choice to reinvest!).
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    If you sort it out quickly and pay the additional tax due you will probably find they don't charge a penalty.

    I've had a couple of clients who have missed the odd savings account interest over the years and none have ever had to pay a penalty
    Regards,

    Burg
  • SarahJSSarahJS Trusted Regular Registered Posts: 273
    burg wrote: »
    If you sort it out quickly and pay the additional tax due you will probably find they don't charge a penalty.

    I've had a couple of clients who have missed the odd savings account interest over the years and none have ever had to pay a penalty

    Same, including really huge interest payments (ie tens of thousands). I'd say just advise your client to apologise for the missed account and pay the additional tax due ASAP, which should mean no penalties if our experiences are to go by.
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