Paying The Penalty

GET YOUR TAX RETURN IN EARLY THIS YEAR !

I say it every year but this coming tax year it may be more important than ever to get your tax return submitted before the deadline because HMRC have just announced the new penalty regime.

Where as in the past if you submitted a tax return late you would be subject to £100 fine and then have a month to pay outstanding tax before a 5% surcharge. Now from this year the old fine of £100 is to be replaced because, the tax authority says, the previous penalty rate was not enough of a deterrent. The new penalty regime for late filing and late payment of self assessment income tax starts in April 2011 and applies to the tax year 2010/11.

Taxpayers who fill in self assessment tax returns will shortly receive their 2010/11 notices and paper returns. These will include information on the new penalty framework and how it will significantly increase penalties for those who file and pay late. A tax return filed six months late could attract a penalty of at least £1,300.

HMRC's Stephen Banyard said: "The vast majority of people don't have to pay penalties because they send in their return and pay on time. But there are always a small number of people who have avoided filing or paying on time. HMRC spends a lot of time pursuing late returns and getting involved in unnecessary appeals work.

The new penalty regime does not look nice.

One day late will mean an initial penalty of £100, even if there is no tax to pay or all the tax owed has been paid.

Three months late will mean an automatic daily penalty of £10 per day, up to a maximum of £900.

Six months late will mean further penalties, which are the greater of 5 per cent of tax due or £300.

Twelve months late will mean yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases, there could be a higher penalty of up to 100 per cent of the tax due.

Penalties for late payment of tax are:

Thirty days late will involve an initial penalty of 5 per cent of the tax unpaid at that date.

Six months late will involve a further penalty of 5 per cent of the tax that is still unpaid.

Twelve months late will involve a further penalty of 5 per cent of the tax that is still unpaid.

I suggest gather all your information in April and get it to your accountant so they have plenty of time to complete your return. Not only will you guarantee your return being filed on time, you can also plan your tax payments. Act now !

If you need help with your tax return please do not hesitate to contact me mitch@ljd.uk.com

Have You Received an Email from HMRC?

HM Revenue and Customs (HMRC) has warned taxpayers to be on the alert for fraudulent emails.

Following the Tax Return deadline, criminals have been busy sending out phishing emails which claim to offer people tax refunds. They are, in fact, fraudulent.

The emails provide a click-through link to a replica of the HMRC website. The recipient is then asked to provide their credit card details. Fraudsters use the information to try to strip funds from the person's account. In the last three months, HMRC has shut down 99 websites that were responsible for sending out the fake tax rebate emails.

Chris Hopson, director of customer contact at HMRC, said that, as a matter of policy, HMRC will only ever contact customers who are due a tax refund in writing by post. He added: "If anyone receives an email offering a tax rebate claiming to be from HMRC, we recommend they send it to phishing@hmrc.gsi.gov.uk before deleting it permanently."

Should anyone receive a suspicious email claiming to be from the tax authorities, HMRC has advice on how to deal with it. Suspicious emails should be forwarded to HMRC at phishing@hmrc.gsi.gov.uk and then deleted from recipients' computers and mail accounts.

Nobody should click on the websites or on the links contained in suspicious emails, or open any attachments.

HMRC never use emails so if you recieve an email from HMRC delete it or contact your Tax Advisor.

Please feel free to contact me mitch@ljd.uk.com

Plumbers Tax Plan Leaked

HMRC have just launced a new tax plan for Plumbers !

Under the tax plan plumbers, gas fitters, heating engineers and members of associated trades who have undisclosed taxable income can register their intention to make a voluntary tax disclosure by 31 May. If they make a full disclosure, most will face a penalty of 10% of the unpaid tax.

Once the disclosure window closes, those that have not come forward but are found to have unpaid tax liabilities will face penalties betwene 30% - 100% of the unpaid tax.

To me this scheme is not restricted just to plumbers as European Law would suggest it should be open to everyone and many people agree. The Chartered Institute of Taxation said: ‘HMRC are saying that if anyone else voluntarily comes forward to put their tax affairs in order they can expect broadly the same terms to those on offer through the Plumbers Plan.

HMRC said the new Plumbers Tax Safe Plan (PTSP) represents a ‘clampdown on tradespeople failing to declare their earnings and pay tax’. But the terms are ‘in line with those HMRC offers for any full and accurate unprompted voluntary disclosure of tax liabilities’.HMRC guidance published today says: ‘Customers who voluntarily come forward and put right their tax position can expect very similar terms to those on offer through PTSP.’

This backs up my argument, HMRC are giving everyone a chance to come forward and the message is loud and clear. Contact them before they contact you.

You can contact me for assistance mitch@ljd.uk.com

Do I Need to Complete a Tax Return? .... YES !!

This question always comes up. Friends and clients a like as well as seasoned professionals somethimes are left confused as to whether they need to complete a Self Assessment Tax Return. A friend of mine recently stated "The Revenue have not requested a return  from me so therefore I do not need to complete one".  My friend is a Marketing Manager who earns £55k a year and has a small rental property in Bournemouth that yields a small profit of £1,000. I told him I would look into it and get back to him.

My first point of call is usually checking HMRC's website. So I did, and it states quite clearly a list of circumstances where one would need to complete a return , I listed the majority and ones I feel are most relevant below

1. You're self-employed
2. a company director (unless you're a director of a non-profit organisation, for example a charity, and don't receive any payments or benefits)
3. a minister of religion (any faith)
4. income from savings and investments of £10,000 or more
5. income from untaxed savings and investments of £2,500 or more
6. income from property (before deducting allowable expenses) of £10,000 or more
7. income from property (after deducting allowable expenses) of £2,500 or more
8. annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income)
9. You must complete a tax return if you have any foreign income that's liable to UK tax.
10. Your annual income is £100,000 or moreYou need to claim certain expenses or reliefs
11. You have Capital Gains Tax to pay You've lived or worked abroad or aren't domiciled in the UK
12. You're a trustee

So you would think in my friends situation he would not need to complete a return. Wrong ! The actual legislation (TMA 1970 s7) states that everyone chargeable to income tax who has not recieved a return must notify HMRC witihn six months of the tax year, The exception is if all your income has been taxed at source.

There is no doubt that HMRC website is a bit confusing. HMRC have tried to cut down on their work by reducing the number of tax returns they receive but this will not stop them issuing you with a penalty if you have failed to notify them of chargeability. I believe this will catch a lot of people out especially those that have annual income of £60,000 - £80,000 and have a small rental property. My friend was far from happy but when you think about it why should he get away with not paying tax?

It is easy to look at HMRC website and see things that you want to see but dont be too short sighted. If you do own a rental property nows the time to speak to your Tax Advisor before HMRC get you !

mitch@ljd.uk.com