Tax Credits Overpayment - how stupid am I?

[jackthelad1]

I have received a letter from HMRC as for the year up to April 2013 the amount they have for my partners self employment does not match the amount I told them about. The amount I supplied is £6000 lower than the amount they have. After searching through paperwork I now realise what I have done. I told them of his net profit and it should have been earnings from self employment I have always used net profit for our tax credits award. I didn't know any different. I have done this for the last 10 years. Some years the figures are nearly the same and in 2006 and 2010 the net profit was considerably lower than self employment earnings so we lost out on some tax credits money. Any chance I can get that back? I know I will have to pay money back from 2013. When I ring them should I just mention that year or what I have done every year? Can't believe I've been such a twit. Thank you in advance for any help.

Sorry I meant in 2006 and 2010 the net profit was considerably higher (not lower) than self employment earnings

I'm not sure I understand.

The figure you give TC's should be the same as the figure he had to pay tax on (ie the net profit of the business) surely?

Depends on whether your DH is a sole trader or a Lydia company.

Not Lydia. LTD

He is a sole trader. We have never had it explained properly. We just get the documents from the accountant once a year and submit the information to HMRC for tax credits. It's my own fault, I should have looked more closely at the information sent. There is the net profit after every year of trading (which I provided to HMRC) and on a separate document - Personal Tax Computation, there is income from self employment which is the figure HMRC want for tax credits renewal. From looking back over 10 years this can be more, less or nearly the same as net profit. Do they ever pay money back from a few years ago or am I just clutching at straws? When I ring should I just discuss the year they mentioned i.e. 2012-13 for which I now know I will owe money. I hope they don't think I did this intentionally as I may get a penalty as well.

I had a similar problem two years ago and was overpaid about £5,000 so they cut my payments down from ?760 per month to £470 per month to collect back the overpayment .
But my payments will increase again in April as they've taken overpayment back now.
Should imagine that's what they'll do in your case.
I would keep quiet about previous years as they might ask to go through all your bookwork with a fine tooth comb and start getting a bit funny if lots if anomilies pop up.

Also if your net profit was lower in 2006/2010 then the figures you gave them were too low so they'll actually have paid you too much in tax credits.

In 2006 & 2010 the net profit (which I've found out is wrong figure to give them) was higher than the Income from Self Employment figure - the amount they need - so apparently I would have been able to claim more. So as well as missing out then I am going to have to pay back some now. How I wish I had someone check what I was doing in the first place. Don't suppose they pay back if you have been underpaid especially from several years ago.

Jack, the net profit of the business can be different to the taxable income, yes. There can be legitimate business expenses which are included in the annual accounts but that are not allowable for tax purposes, and also capital allowances/depreciation of assets will affect the taxable profit.

I'd give them the correct figure for the year they are asking for and keep schtum regarding earlier years.

I would however get the correct figures together for yourself so you can be aware/prepared if any other years are looked at iyswim.

Fwiw I think they will be able to see it as a genuine mistake on your part. In future make sure the accountant knows you need taxable income for TC's and not just business net profit (which is what you'd use, for eg, for a loan/mortgage.)

I phoned them the other day to declare a change in hours and was asked for my net profit for last year. I told them I had taken drawings from the business, but he said they just need the net profit. I got an extra chunk paid into my account this month, I'm worried now that I am being paid the wrong amount

Perhaps you need to check if it's the net profit they need or income from self employment as (I have now discovered) they can be completely different amounts.

I have now got all the figures for previous years. I wish
I knew that they didn't want the net profit. For two years the net profit was considerably higher than the amount they want so I've missed out. The other years are not too different.

This is what HMRC says;

Step 1: how much profit you made

First work out what profit you made. If you’ve filled in your tax return for the last tax year, tell the Tax Credit Office the profit you included on the return. If you had more than one business, add up all of the separate business profits.

If you haven't filled in your tax return, you'll need to estimate your profit for the last tax year. A profit is the difference between all the money you made from doing work or selling goods and the cost of doing that business.

You can get help in working out your profit by calling the Self Assessment Helpline.
Opening hours8.00 am to 8.00 pm, Monday to Friday
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I believe that tax credits are only back paid 31 days. I called HMRC the other day to make a claim as self employed from 6th Jan and they told me they sent the form by Royal Mail 2ND CLASS and it takes 2 weeks !!!!!

So, as I will be retuning the form after the 31 days I will lose out. Has anyone else come across this?

Accountant told me to give tax credits net profit figure.
Just let dh read this thread and we both looked like this

My accountant also told us we need to give tax credits the net profit figure.

Spoke to tax credits today and the figure they need is total taxable profit which is usually different from net profit. Can be higher or lower. So confusing and frustrating.