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The not so scary part

One thing to always take in to account is the higher your rebate, the lower your net profit. Your net profit is important to you for many reasons, and it's what all financial providers will make their lending decisions upon when you apply for a mortgage or loan, and most rented properties.

The lower your net profit, the lower the amount you can borrow. Whilst this may not be of great importance to you now, it's also worth remembering that a mortgage lender will ask for three years of accounts and decide based upon three years' worth of net profits.

Most landlords or letting agents will also request at least your previous year's net profits when making their affordability calculation.

Some loan providers are also starting to request evidence of your net profit even when lending smaller amounts. You may find if you're thinking about buying a new car soon, your net profit may be more important than you once thought.

The slightly scarier part

One of the first things to point out is that just because is a rebate is paid, it doesn't mean your return has been checked and that everything is okay. HMRC cannot physically check all returns before issuing a repayment, so they pay first and check later! However, do remember that they have 6 years to complete their checks, and can open an investigation in to your return at any point during this time if they feel the need to do so.

Another thing to remember is that any amount owed to HMRC is an amount owed to the Crown. This means that the standard Statute of Limitations does not apply, and any amount you owe will not just go away after 6 years. It will remain with you forever, and the next time you are entitled to any money from HMRC they will always collect what's owed first. It's not uncommon for a debt that's over 20 years old to be collected.

It's vital that you know what has been included on your tax return, as you are the person that is that is responsible for ensuring the information is correct.

You can pay an accountant to submit and prepare you return, but you are the person that would need to provide evidence to match what's listed on the return, not your accountant.

If your return was investigated and errors were found it would be you that is responsible for them, and you that would need to repay any amount HMRC deemed to be overpaid.

It doesn't matter what your accountant friend or colleague says, it's you that will always need to justify that information.

Learn more about why a large rebate can be expensive.


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