6 - Tax Compliance and self-assessment

Question 1

What taxes are paid via self-assessment?

Answer 1

Income tax
Class 2 and 4 NICs
Capital Gains Tax (CGT)

Question 2

How is the High Income Child Benefit Charge collected?

Answer 2

Via self-assessment

Question 3

What is a Notification of Chargeability and when does it need to me made by?

Answer 3

Advising HMRC of your intent to do a tax return, for the first time.
Before 5 October (window of 6 months after tax year end it relates to)

Question 4

What are the deadlines to submit a tax return and when is the owed tax then due?

Answer 4

Paper – 31 October
Electronic – 31 January

Owed by midnight on 31 January

Question 5

What is the late penalty for failing to submit a tax return before the due date?

Answer 5

£100 applied immediately

£10 per day, charged once the return is 3 months late for a maximum of 90 days

the higher of £300 or 5% of the tax due, applied if the form is 6 months late

a further £300 or 5% of the tax due (whichever is higher), applied if the form is 12 months late.

Question 6

HMRC can carry out a compliance check on anyone’s tax return, what are these also known as?

Answer 6

An enquiry

Question 7

How soon after submitting your tax return do HMRC normally perform a compliance check, if required?

Answer 7

Within 12 months

Question 8

What is the balancing payment

Answer 8

The balancing payment consists of an adjustment calculated by comparing the actual tax payable for the year with the total tax already paid through the payments on account. This could involve a payment to or from HMRC.

Question 9

What is the likely outcome of a compliance check on your tax return?

Answer 9

Amendment to your tax return

Question 10

What is GAAR and what is it’s purpose?

Answer 10

General Anti-Abuse Rule - it prevents taxpayers entering into abusive tax arrangements/avoidance schemes, not yet registered with HMRC. It also helps them pay the right amount of tax.

Question 11

For how long can a taxpayer amend their own tax return after it’s been submitted?

Answer 11

Within a year of submitting, or 15 months if submitted by paper

Question 12

What is the penalty if a case is tackled through GAAR?

Answer 12

Up to 60% of the counteracted tax

Question 13

Tax avoidance schemes should be disclosed to HMRC as per which set of rules?

Answer 13

Disclosure of Tax Avoidance Schemes (DOTAS)

Question 14

What is an Accelerated Payment Notice?

Answer 14

A notice to pay a tax charge before a dispute has been settled under GAAR

Question 15

What is a Follower Notice?

Answer 15

A notice for a taxpayer to amend their tax return due to an illegitimate tax advantage.

Question 16

What is the penalty for failing to act upon a Follower Notice?

Answer 16

30% of the disputed tax
Further 20% charged depending on the outcome

Question 17

When are the first two payments on account and the final balancing payment due?

Answer 17

Payment on account - 31 January (of the tax year concerned)
Payment on account - 31 July (after tax year concerned)
Balance of payment - 31 January (after tax year concerned)

Question 18

What is the penalty for a late balancing payment?

Answer 18

5% after 30 days
Then 5% at 5 months
Then 5% after another 6 months (11 months total)

Question 19

What taxes are paid on the balancing payment?

Answer 19

Class 2 NICs
Capital Gains Tax (CGT)
Student loan repayments

Question 20

In which 2 circumstances might the payments on account not be required?

Answer 20

Income in the last tax year was less than £1,000
80% of their income tax was taken via PAYE

Question 21

Balancing payments can be collected via PAYE in a later year, if the taxpayer owes how much and files the tax return by when?

Answer 21

Less than £3,000 and by 30 December online. (31 October by paper)

Question 22

If the total tax due for 2022/23 was £50,000, what would the next 2 payments on account be due and when?

Answer 22

£25,000 31 January 2024
£25,000 31 July 2024

Question 23

Individuals and businesses unable to pay the full tax due on time may be able to make a time to pay arrangement online, but they must owe less than how much?

Answer 23

£30,000

Question 24

If a time to pay arrangement has been made online, how soon would you need to pay off the tax owed?

Is interest applied?

Answer 24

Up to 12 months

Interest is applied, but can void penalties by doing this

Question 25

Joe pays his balancing payment for 2023/24 on 7 August 2025. What penalties will be due?

Answer 25

The due date was 31 January 2025, so there will be a penalty of 5% of the tax unpaid at 3 March 2025, with a further penalty of 5% of the tax unpaid at 3 August 2025.

Question 26

When is a taxpayer given a K code on their coding notice?

Answer 26

A K-code is set when taxable benefits in kind and other deductions are more than the employee’s allowances.

For example, you might still owe tax from a previous tax year.

Question 27

What is the electronic system used when employers send tax and NIC information to HMRC electronically every time employees are paid?

Answer 27

RTI - Real Time Information

Question 28

If not using RTI, what can smaller employers of less than 10 employees use?

Answer 28

HMRC’s Basic PAYE Tools

Question 29

Benefits in kind that have been payrolled do not need to be reported on form P11D at the end of the tax year. True or false?

Answer 29

True, otherwise you would duplicate the tax

Question 30

By which day of the month must the employer pay to HMRC all money owed for PAYE and NICs for the tax month?

Answer 30

Day 22 (day 19 if not electronic)

Question 31

When should employers pay employer NICs on benefits in kind by?

Answer 31

22 July in most cases

Question 32

How soon should an employee be given their P60?

Answer 32

By 31 May

Question 33

What is the time limit for HMRC to investigate offshore non-compliance? (i.e., taxpayers failing to declare tax on overseas affairs)

Answer 33

12 years

Question 34

Which HMRC campaign is aimed at landlords who owe tax on rental income whether through misunderstanding the rules or because of deliberate evasion?

Answer 34

Let property campaign (as at April 2023)

Question 35

Who do the Affluent Compliance Team at HMRC target?

Answer 35

Targeting tax evasion of additional rate taxpayers or those with a net wealth of £1m +

Question 36

What is the aggravated penalty applied when taxpayers hide their wealth by diverting assets to more secretive jurisdictions?

Answer 36

50%

Question 37

What is a tax sham?

Answer 37

Misleading HMRC to thinking ‘transaction A’ is actually ‘transaction B’

Question 38

GAAR applies to all taxes except for which one?

Answer 38

VAT

Question 39

Who ensures GAAR is applied consistently?

Answer 39

GAAR advisory panel

Question 40

If a case is tackled by GAAR, what is the maximum tax penalty applied?

Answer 40

Up to 60% of the counteracted tax

Question 41

Taxpayers who fail to correct their tax return after receiving an APN, will receive a penalty of how much?

Answer 41

30% of the tax disputed, plus 20% depending on the outcome of the dispute