6 - Tax compliance and self assessment

Question 1

If a person has not been notified to complete a tax return, by when should they notify HMRC of any chargeability?

Answer 1

5th October after the end of the tax year in question

Question 2

By what date should a paper return be filed?

Answer 2

31st October

Question 3

If a PAYE individual has a payment of less than £3000 to make, by when should they file their return to have the tax collected by PAYE?

Answer 3

30th December, online

31st October, paper

Question 4

For payments on account in respect of income tax and class 4 NIC’s, when are the due dates?

Answer 4

31st Jan within the current tax year
31st July after tax year end
31st Jan after tax year end

Question 5

On what are payments on account based?

Answer 5

Half the previous tax year's income tax payable - over and above that deducted at source
Include class 4 NIC's and child benefit tax income

Question 6

When would a payment on account not be required?

Answer 6

If amount paid in the previous year was under £1,000

If 80% of the tax payable in the previous year was at source or PAYE

Question 7

Why might a person claim a reduction in payments on account?

Answer 7

If they suspect it may result in over-payment such as:
Lower Income
Higher deductions
Higher proportion deducted at source

Question 8

What is the process for relief claims for previous years?

Answer 8

Calculated as if it were given in the previous year, however given as a repayment in the year in which the claim arises

They do not reassess a previous year and reduce payments on account for the current year.

Question 9

When is interest charged by HMRC for late payment?

Answer 9

From the date the tax was due - i.e. 31st Jan/31st July
5% penalty for any tax remaining unpaid after the balancing payment is due
After 5 months, a further 5% penalty is charged, and again after 6 months

Question 10

What are the penalties for a late return?

Answer 10

£100 after 31st Jan
£10 daily for a maximum of 90 days
If more than six months late, £300 or 5% of the tax outstanding
At 12 months, a higher penalty is charged if the lack of return is deliberate

Question 11

In addition to late return and interest, what other penalties are levied by the HMRC?

Answer 11

Errors which are careless, deliberate and concealed

Failing to notify of a liability by 5th October

Question 12

what time limit does HMRC have to start a compliance check?

Answer 12

within twelve months of the date they receive the return

After this period, only if they suspect fraud, negligence or conduct issues, insufficient information provided that might suggest the return is not accurate

Question 13

When must an employer run their payroll system and report to the HMRC?

Answer 13

Each time an employee is paid - either before or at the time

Question 14

What is the benefit of an employer putting benefits in kind through payroll?

Answer 14

They do not need to be reported on a P11D at the end of the tax year

Question 15

Which benefits in kind cannot be pay-rolled?

Answer 15

Living accommodation

Interest free and low interest loans

Question 16

What has to be paid to HMRC and when by employers on a monthly basis?

Answer 16

Tax and NIC’s from employees
Employers NIC’s
Student loan deductions collected

22nd day if paying electronically
19th if not

Question 17

What year end tax submissions does an employer need to make?

Answer 17

P11D for each employee with taxable benefits or expenses (unless already pay-rolled)
P11D(b) with NIC’s due on the above
Due by 6th July

Question 18

What are the penalties for late submission of monthly information for an employer and late payment?

Answer 18

None for first month
£100 and £400 depending on number of employees
5% if three months late

1% for late payment
5% if more than 6 months late
5% of still not paid after 12 months
Interest on a daily basis
Additional charges for inaccurate information

Question 19

What is the time limit for HMRC to be able to investigate off-shore non tax compliance?

Answer 19

12 years

Question 20

What are the key elements of the HMRC ‘no safe havens’ strategy?

Answer 20

Leading international collaboration between tax authorities
Assisting compliance
Responding appropriately

Question 21

What type of person might be targeted by the Affluent Compliance Team?

Answer 21

Top rate tax payers or assets over £1M, including:
Using avoidance schemes
A low effective rates across total income
Bank accounts in Switzerland
Understating tax liability
Fail to complete their self assessment on time
Avoid or evade SDLT on purchases
Have UK and offshore property portfolios

Question 22

What higher penalties are chargeable if disclosure failures relate to overseas matters?

Answer 22

50% higher where the country concerned exchanges information but not automatically
Double the amount where the country concerned does not exchange information

An aggravated penalty of up to 50% applies where taxpayers hide their wealth by diverting assets to more secretive jurisdictions

Question 23

Under the Criminal Finances Act 2017, what type of offences might companies or partnerships fall foul to?

Answer 23

Criminal tax evasion - deliberate and dishonest
Criminal tax evasion committed by an employee, agent or other persons performing services
The business failed to prevent the person committing the crime

Question 24

What is legal tax mitigation?

Answer 24

Arranging a legitimate way for a transaction to be processed as to pay the least amount of tax

Question 25

What is the Ramsay principle?

Answer 25

Courts can look behind the normal tax consequences of each step of a transaction and look at the overall result of the scheme

Question 26

What is the usual cycle for a new tax avoidance scheme?

Answer 26

Tax saving scheme is marketed
HMRC challenges the scheme - usually in court
New legislation is passed where HMRC are not confident in winning the challenge
A new scheme emerges

Question 27

What government approach was launched in the Finance Act 2004 in relation to avoidance schemes and why?

Answer 27

Disclosure of Tax Avoidance schemes (DOTAS) legislation

Firms must register schemes and will be given a scheme number, which must be provided on their tax returns

Question 28

How was DOTAS extended?

Answer 28

To include Income, Corporation, Capital Gains and Inheritance tax. Also NIC’s and SDLT.

Question 29

How often must a promoter of a tax avoidance scheme provide a list of users to the HMRC?

Answer 29

Quarterly

Question 30

If a company devises a tax avoidance scheme and fails to notify the HMRC, what are the penalties?

Answer 30

Up to £5,000 daily

Question 31

What are the questions asked to confirm whether GAAR applies? (General anti-abuse rule)?

Answer 31

Is there a tax arrangement (that gives rise to an advantage)?
Does the advantage relate to one of the taxes under GAAR (all the main taxes exept VAT)?
Is it reasonable to conclude that obtaining of a tax advantage was the main (or one of) purposes of the arrangement?
Are the arrangements abusive under the double reasonableness test?

Question 32

What is the penalty of tax counteracted to cases tackled by GAAR?

Answer 32

Up to 60%

Question 33

When could the HMRC use a APN (accelerated payment notice)?

Answer 33

Involvement in a tax avoidance scheme disclosed under DOTAS
Caught by GAAR
Received a follower notice

Also:
There is a current compliance check or an open appeal
The return or appeal is made on the basis there is a tax advantage from the scheme sued

Question 34

What is a follower notice and what is the penalty for not taking corrective action?

Answer 34

If it has been determined from another litigation that a tax payer has used an avoidance scheme. They should adjust their tax return to remove the advantage.

Up to 50% of the disputed tax

Question 35

What are the penalties to the enabler of a defeated tax avoidance scheme?

Answer 35

Up to the value of the fee paid to the enabler

Question 36

What is a disguised remuneration scheme?

Answer 36

Tax savings schemes designed to avoid income tax and NIC’s by paying users income in the form of loans that would never be repaid