Beware the green-eyed tax monster: Sue Fieldman warns of the perils awaiting recipients of an Inland Revenue form sent out without explanation

IF YOU have registered to receive interest gross on your bank or building society account, do not ignore an innocent looking green form sent by the Inland Revenue.

There is no covering letter with the form RU6(M) to explain why you have to fill it in, no leaflet on how to answer the questions and the form does not explain what happens if you fail to complete it.

You may, therefore, be tempted to throw it in the bin. But failure to complete the RU6(M) has drastic consequences - the Revenue can stop you receiving interest gross without basic rate tax being taken off.

According to RU6(M), the taxman merely wants the information 'to help me trace any tax papers that may be held on you'. An innocent enough request, with even a 'please' and 'thank you'.

But there is far more to the form than meets the eye. According to a spokesman for the Inland Revenue the forms are being sent out on a 'random sampling' basis to people who have registered for gross interest.

The spokesman was unable to confirm how many are being sent as they are apparently not being counted. It is 'part of the usual compliance thing'.

He added: 'Nobody is being targeted specifically, but it is being sent to anyone who filled in an R85 form for claiming interest gross.'

In small print at the end of form R85, used to register for gross interest, it states: 'The Inland Revenue will be auditing a small sample of accounts and records to ensure that the scheme is working properly and the rules are being kept.'

But you hand form R85 into your bank or building society. So how are you supposed to know that the green RU6(M) is anything to do with you having registered for gross interest?

There is no covering letter sent with the form to explain the connection - an inexcusable oversight by the Inland Revenue. There is nothing on the form itself to explain why you are completing it, and not even an explanatory leaflet to tell you how to fill in the questions.

Yet the forms are being sent to the young, the old and married women, all of whom registered for gross interest and many of whom will never have received a written communication from the Revenue in their lives.

David Rothenberg, of the chartered accountants Blick Rothenberg, says:'To send these forms out without clearly written explanatory notes is appalling. Most people who receive them will not understand how to deal with them.

'The questions about income on the back of the form look just like a tax return. But if you receive a tax return the Revenue give you some notes to explain what you are supposed to do with it'.

We asked the Inland Revenue what happened if you did not complete the form. The spokesman said: 'Strictly it is not enforceable, but if you do not complete it you could lose your entitlement to gross interest on the basis that the whole exercise is a compliance exercise'.

So you have to complete a form, which you have no idea relates to you having claimed gross interest, and then you have no idea that if you do not complete it you could lose the gross interest facility.

The Inland Revenue spokesman says that if you do not complete the form within the specified 30 days you will get a reminder. This warns that if you do not complete the form within another 30 days 'the Inland Revenue has the right to reconsider your tax position, and that may involve removal of the facility of gross interest'.

According to the spokesman, the Revenue makes it clear why the information is required and if you do not complete the form what will happen. At the end of the form is the warning: 'It is a serious offence to make a false declaration.'

(Photograph omitted)