IFM28120 - Real Estate Investment Trust : Distributions: administration: quarterly returns: mistakes : SI2006/2867

If the company becomes aware that they have omitted something from the return, included something in error or made some other mistake in completing the return, they have to deliver an amended return correcting the mistake(s) (SI 2006/2867/Reg 11). The amended return should be sent in as soon as the company becomes aware of the mistake.

The company must also make any adjustments to payments, repayments, set offs etc. as are necessary to reflect what the position would have been if a correct return had been delivered in the first place. If a company makes a distribution as a PID gross or under deduction of WHT and subsequently discovers this is incorrect then it is a matter to be resolved between the company and the shareholders.

For example, company C (the principal company of a Group REIT) believed shareholder A was a company that was UK resident for tax purposes, and paid a PID of 100 gross to A on 5 January 2018. However A ceased to be UK-resident on 31 December 2017 so was not entitled to gross payment: C became aware of this in May 2018. The return for quarter ending 31 March 2018 showing no tax payable in respect of the 100 paid gross was therefore incorrect. C sends in an amended return for QE 31 March 2018 on 7 June 2018, showing 78 payable to A and 22 tax due, accompanied by 22 tax. It is up to C to decide whether or how to seek reimbursement of the 22 paid in error to A.

Where the company has paid a shareholder net when they were entitled to gross payment, the consequences depend on what the company could have reasonably believed about the shareholder. For information on the meaning of ‘reasonable belief’ see IFM28125. If the company might reasonably have known that gross payment was due (for example, a charity has sent in details of its Charity Registration number but the information has not been acted on) then the company should make an amended return and pay over the tax deducted in error to the shareholder. How the company recovers the tax from HMRC depends on how the tax was accounted for in the original return.

If however the company had no reason to believe gross payment was appropriate, it is up to the shareholder to claim the tax back as part of their SA return or as a repayment claim in the normal way. If the shareholder is entitled to gross payment it is for that shareholder, or an intermediary acting on their behalf, to provide the company with assurances that can form the basis of reasonable belief.

If the company pays a distribution as a PID, gross or under deduction of tax, and later discovers that there are insufficient property rental business reserves in categories (a), (aa), (c) or (d) to attribute the distribution to property rental business profits or gains then the company must make an amended return to HMRC, pay to the shareholders any tax deducted in error and ensure that all shareholders are made aware of the true nature of the distributions they have received. An overpaid PID cannot be used to frank the distribution requirements of other accounting periods.