Ch 6 - tax compliance/self assessment

Question 1

What taxes are paid via self assessment?

Answer 1

• Income tax on all types of income
• Class 2 and 4 NICs
• CGT
• High-income child benefit charge
• Student loan repayments (if self-employed)

Question 2

When must a person notify the HMRC by if they have not received a notification to submit tax returns?

Answer 2

5th October after end of tax year

Question 3

What are the deadlines for tax returns?

Answer 3

• 31st January (online)

- 31st October (paper)

Question 4

Income tax and class 4 NICs are paid in what instalments?

Answer 4

• First payment on account = 31st January during the tax year
• Second payment on account = 31st July after the end of the tax year
• Balancing payment = 31st January after tax year

Question 5

What is the payment on account based on?

Answer 5

Half of previous

Question 6

What is the balancing payment?

Answer 6

Adjustment - compares the actual tax payable for the year and the total already paid through payments on account

Question 7

Can a reduction in accounts payments be made?

Answer 7

Yes - but need to forecast reduction

Question 8

Does carried back tax relief reduce payment on account?

Answer 8

No

Question 9

What are the penalties for late payments?

Answer 9

Interest charged on late payments is 2.6%
More than 30 days late = 5%
Further five months = 5%
Further six months = 5%

Question 10

What are the penalties for late submissions?

Answer 10

Fixed penalty = £100
More than 3 months late = £10 daily penalty for 90 days
More than 6 months late = £300/5% (whichever is highest)
More than 12 months late = £300/5% (whichever is highest)

Question 11

How long after submitting a tax return can a taxpayer make an amendment?

Answer 11

12 months after 31st January following the tax year

Question 12

HMRC can start an enquiry within how many months after a tax return is submitted?

Answer 12

12 months

Question 13

When can HMRC carry out a compliance check on a return?

Answer 13

Can be random audit or target by suspicion

Question 14

Employers deduct what from payments to employees/directors?

Answer 14

Income tax and class 1 NICs

Question 15

How do employers pay deductions?

Answer 15

Monthly directly to HMRC (real time reporting)

Question 16

What is the aim of PAYE coding?

Answer 16

Deduct correct amount of tax/avoid self assessment

Question 17

How can benefits in kind be treated?

Answer 17

Payrolled as cash OR via self assessment/P11D form

Question 18

What is a payroll code made up of?

Answer 18

Letter = type of personal allowance
Number = Tax free income
Last digit removed and 9 is added

Question 19

What does a tax code beginning with K mean?

Answer 19

No tax free income

Question 20

Past underpayments of less than what, can be collected via PAYE/coding procedure?

Answer 20

Less than £3000

Question 21

How do employers send tax and NIC information to HMRC?

Answer 21

Electronically/real time - every time employee is paid

Question 22

When is an employee p60 received by?

Answer 22

31st May

Question 23

When does the tax month begin?

Answer 23

6th (ending on 5th)

Question 24

By when must an employer pay all money owed for PAYE/NIC for that month?

Answer 24

22nd day following tax month (electronic)

19th (post)

Question 25

What is the employment allowance for an employers NICs?

Answer 25

£4000*

*if less than £100,000 paid in NICS prev year

Question 26

What is the number of employees an employer can have whilst still being able to make payments by post?

Answer 26

Up to 250

Question 27

What are PAYE payments?

Answer 27

• Wages and salaries
• Bonuses and commissions
• Holiday pay
• Pensions
• Payments under profit sharing schemes
• Most benefits and some expense allowances
• SSP, SMP, SPP, ShPP, SAP

Question 28

When is PAYE operated for an employee?

Answer 28

When the employee is entitled to receive the payment

Question 29

When is PAYE operated for a director?

Answer 29

Earliest of:

• date the payment made
• date the director becomes entitled to be paid
• date the amount is credited in the company’s books
• date when the remuneration is fixed/agreed

Question 30

What is tax evasion?

Answer 30

Illegal - failing to provide full and accurate information to HMRC

Question 31

What is the Disclosure Of Tax Avoidance Schemes(DOTAS)?

Answer 31

Tax avoidance schemes must register with HMRC

HMRC will provide scheme number that must be quoted on tax returns

Question 32

What must promoters of schemes report to HMRC?

Answer 32

Quarterly list of clients

Question 33

What is GAAR?

Answer 33

Aims to counteract tax advantages and only applies if the answer is ‘yes’ to the following questions:

1) is there a tax arrangement?
2) does the advantage relate to one of the taxes to which GAAR applies?
3) was tax advantage one of the main purposes?
4) are the arrangements abusive under the double reasonableness test?

Where GAAR has applied, a tax geared penalty of up to 60% of the counteracted tax can be charge

Question 34

What is an Accelerated Payment Notice (APN)?

Answer 34

HMRC can require users of failed schemes to make upfront payments of the underpaid/disputed tax

Question 35

Who is an enabler of Defeated Tax Avoidance Arrangements?

Answer 35

Someone who designs, manages, markets or facilitates tax avoidance

Question 36

What is the penalty for an enabler?

Answer 36

Penalty is anything up to the value of the fees paid to the enabler for the arrangement

Question 37

What is a Disguised Remuneration Scheme? What is the charge on these?

Answer 37

Scheme avoided income tax and NICs by paying the users income as loans with no intention of repayment.

Loan charge applies = adds all the outstanding loans and taxes them as income, spread evenly across 3 years