Tax returns: Threat of large fines from HMRC

People who file their tax returns late could face a fine of up to £1,600 – even if they have no extra tax to pay.

Many people need to submit a self-assessment tax return to HM Revenue and Customs (HMRC), irrespective of whether they expect a tax bill.

But new, stiffer penalties from the tax authority could hit those who fail to submit their tax return.

The self-employed, company directors and those with multiple incomes have to submit an annual return

Deadlines

Nearly 10 million people in theUKmust submit a self-assessment return each year.

The deadline for paper returns is 31 October, and for online returns it is 31 January. Filing the return late previously led to a £100 fine.

Under the new stricter system there will still be an initial £100 fine for filing after 31 January.

But for the next three months the additional fine will be £10 per day, up to a maximum of £900.

For delays between three months and six months the further fine will be a flat £300 or 5% of the tax due, whichever is higher.

And for returns filed between six months and 12 months late there will be another flat charge of of £300 or 5% of the tax due (again, whichever is higher) and in some “serious” cases the taxpayer may be fined 100% of the tax instead.

Someone who failed to submit their return for 12 months would end up being fined at least £1,600.

Fines will no longer be cancelled if the taxpayer files late, but owes no money to HMRC, because there is no extra tax to pay or because it had been paid.

“There is a real danger that taxpayers could inadvertently find themselves on the wrong end of a significant penalty, simply because they correctly thought all their tax had been paid, and that was the end of their obligations.

“HMRC need to make very sure that they do not issue notices to submit a return without good reason, and they publicise these penalties widely.”

Self Asessment Deadline Extended to 2 February

HMRC acted yesterday to defuse administrative problems and taxpayer anger over the call centre strike planned for 31 January by effectively extending the Self Assessment deadline until Thursday 2 February.

In a statement on its website, the department announced, “To make sure our customers are not disadvantaged if they cannot get through to HMRC’s call centres on 31 January, we will not impose any late filing penalties for people who file their Self Assessment returns on 1 and 2 February.”

The SA deadline remains midnight on 31 January. But HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No interest will be charged on payments due on 31 January that are paid on 1 or 2 February.

HMRC PAYE penalty rates and how they will apply

Penalties will be charged on each PAYE reference number (also called a ‘PAYE scheme’) independently. Therefore, if you operate more than one PAYE scheme you need to make sure that amounts due for each individual PAYE scheme reference is paid in full on time.

The rest of this section explains how the penalties apply for different types of payment.

Monthly or quarterly PAYE payments

You will not be charged a penalty if only one PAYE amount is late in a tax year – unless that payment is over six months late.

The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. So if you pay part of what is due on time then any penalty will only be charged on the part that is late. The table below shows how the penalties are calculated.

Penalty charges for late monthly and quarterly PAYE payments

No. of times payments are late in a tax year	Penalty percentage	Amount to which penalty percentages apply
1	No penalty (as long as the payment is less than six months late)	Total amount that is late in the tax year (ignoring the first late payment in that tax year)
2-4	1%
5-7	2%
8-10	3%
11 or more	4%

 

 

For further information follow the link

http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm

Penalties if you miss the tax return deadline

If you miss the deadline, the longer you delay, the more you’ll have to pay. So it’s important to send your tax return to HMRC as soon as you can.

Penalties for missing the tax return deadline
Length of delay	Penalty you will have to pay
1 day late	A fixed penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late	£10 for each following day – up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late	£300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late	£300 or 5% of the tax due, whichever is the higher. In serious cases you may be asked to pay up to 100% of the tax due instead. These are as well as the penalties above.

Example

Mrs A’s tax return is due on 31 January 2012 but HMRC don’t receive it until 5 August 2012.

It is over six months late so she will have to pay all of the following:

• £100 fixed penalty
• £900 penalty – this is £10 each day from 1 May to 29 July, when the maximum 90 day penalty is reached.
• £300 or 5 per cent of the tax due – whichever is the higher.

http://www.hmrc.gov.uk/sa/deadlines-penalties.htm#3

HMRC Paper Employer Packs

HMRC no longer issue paper Employer packs, Employer Bulletins or the Basic PAYE Tools (formerly the Employer CD-ROM). Instead all this guidance is now available online. To find out more go to http://www.businesslink.gov.uk/employerpackandbulletins

Employer Bulletin Issue 39

The latest version of the Employer Bulletin has just been published. This edition contains lots of useful information and also identifies 3 essential articles that you need to read. These are highlighted on the contents page.

To find out more go to http://www.businesslink.gov.uk/employerbulletin

The pros and cons of the Cash Accounting Scheme

Benefits of cash accounting

Using cash accounting may help your cash flow, especially if your customers are slow payers. You do not need to pay VAT until you have received payment from your customers. So if a customer never pays you, you don’t have to pay VAT on that bad debt as long as you continue to use the Cash Accounting Scheme.

Disadvantages of cash accounting

Dependant on your own circumstances, there may be some disadvantages to using cash accounting:

• You cannot reclaim VAT on your purchases until you have paid your suppliers. This can be a disadvantage if you buy most of your goods and services on credit.
• If you regularly reclaim more VAT than you pay, you will usually receive your repayment later under cash accounting than under standard VAT accounting, unless you pay for everything at the time of purchase.
• If you start using cash accounting when you start trading, you will not be able to reclaim VAT on most start up expenditure, such as initial stock, tools or machinery, until you have actually paid for those items.
• If you leave the Cash Accounting Scheme you will have to account for all outstanding VAT due including any bad debts.

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• Additional record-keeping for the Cash Accounting Scheme

  Changing to cash accounting doesn’t mean you can just keep a record of your cash position – you must also keep track of debtors and creditors, so you know the real position with regard to what you owe and are owed. You need this information for Income Tax or Corporation Tax purposes.

  In addition to keeping all required VAT records and accounts for standard VAT accounting, you must also use the following procedures for sales and purchases.

  Invoices

  If you are paid in cash you must, if asked by your customer, endorse the customer’s copy of your sales invoice with the amount and date paid.

  If you settle an invoice using cash, you must keep a copy of the purchase invoice endorsed with the amount and date paid.

  Payment records

  Your records must clearly cross-refer payments received or made by you to the corresponding sales or purchase invoices. You must also make sure that you cross-refer these payments and receipts to evidence such as bank statements, cheque stubs and paying-in slips.

National minimum wage rates

From 1 October 2011 the following rates apply:

• £6.08 per hour for workers aged 21 years old and over
• £4.98 per hour for workers aged 18 to 20 years old
• £3.68 per hour for workers above school leaving age but under 18 years old
• £2.60 for apprentices under the age of 19 years old or aged 19 years old or over and in the first year of their apprenticeship

The age threshold for the main rate (the rate for workers aged 21 years old and over) was reduced from 22 to 21 on 1 October 2010.

It is good practice to display information about current NMW rates in your workplace.

Any changes to the NMW rates usually take place in October each year. If changes are announced, this page will be updated to display the new rates. Old NMW rates can be viewed on the Low Pay Commission website.

An introduction to workplacepension changes

 

　

There are new duties on employers, to help more people save for their retirement. All employers will need to act to comply with the law. This leaflet provides an introduction to the new employer duties.

Follow the link for more information

http://www.thepensionsregulator.gov.uk/docs/intro-to-workplace-pension-changes-2011.pdf

 

Summer job students reminded about tax

HM Revenue & Customs is reminding students that they may not have to pay tax on the money they make from summer jobs.

To earn extra cash, many undergraduates take summer jobs. But large numbers are unaware that, provided their total earnings for the tax year are less than the personal allowance of £7,475, they will not have to pay any tax on the money they make.

To ensure their employers don’t deduct tax they don’t owe, students need to fill in a form P38(S), which they can download from the HMRC website at www.hmrc.gov.uk/forms/p38s.pdf

Students who fail to fill in the form will not lose out, however, as they can reclaim any tax paid by sending HMRC a form P50, available online at www.hmrc.gov.uk/pdfs/p50.pdf

Stephen Banyard, Director General of Personal Tax at HMRC said:

“We don’t want students to pay tax when they don’t owe any, so we’re encouraging them to fill in a P38(S) and send it back to us. That way they can keep all the money they’re earning for student life’s essentials.”

Employer publications email alert service

 

HM Revenue & Customs (HMRC) is reducing the amount of information it posts to employers by replacing it with online guidance and downloadable applications.

If you are an employer currently operating a PAYE scheme, HMRC recommends signing up to receive email alerts so they can remind you when the latest employer information is available to view or download online.

HMRC Link http://www.businesslink.gov.uk/bdotg/action/layer?r.s=sl&topicId=1084757002&furlname=hmrcemployeremailalerts&furlparam=hmrcemployeremailalerts&ref=&domain=www.businesslink.gov.uk