Ch 6 - tax compliance/self assessment Flashcards
What taxes are paid via self assessment?
- Income tax on all types of income
- Class 2 and 4 NICs
- CGT
- High-income child benefit charge
- Student loan repayments (if self-employed)
When must a person notify the HMRC by if they have not received a notification to submit tax returns?
5th October after end of tax year
What are the deadlines for tax returns?
- 31st January (online)
- 31st October (paper)
Income tax and class 4 NICs are paid in what instalments?
- 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
What is the payment on account based on?
Half of previous
What is the balancing payment?
Adjustment - compares the actual tax payable for the year and the total already paid through payments on account
Can a reduction in accounts payments be made?
Yes - but need to forecast reduction
Does carried back tax relief reduce payment on account?
No
What are the penalties for late payments?
Interest charged on late payments is 2.6%
More than 30 days late = 5%
Further five months = 5%
Further six months = 5%
What are the penalties for late submissions?
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)
How long after submitting a tax return can a taxpayer make an amendment?
12 months after 31st January following the tax year
HMRC can start an enquiry within how many months after a tax return is submitted?
12 months
When can HMRC carry out a compliance check on a return?
Can be random audit or target by suspicion
Employers deduct what from payments to employees/directors?
Income tax and class 1 NICs
How do employers pay deductions?
Monthly directly to HMRC (real time reporting)
What is the aim of PAYE coding?
Deduct correct amount of tax/avoid self assessment
How can benefits in kind be treated?
Payrolled as cash OR via self assessment/P11D form
What is a payroll code made up of?
Letter = type of personal allowance
Number = Tax free income
Last digit removed and 9 is added
What does a tax code beginning with K mean?
No tax free income
Past underpayments of less than what, can be collected via PAYE/coding procedure?
Less than £3000
How do employers send tax and NIC information to HMRC?
Electronically/real time - every time employee is paid
When is an employee p60 received by?
31st May
When does the tax month begin?
6th (ending on 5th)
By when must an employer pay all money owed for PAYE/NIC for that month?
22nd day following tax month (electronic)
19th (post)
What is the employment allowance for an employers NICs?
£4000*
*if less than £100,000 paid in NICS prev year
What is the number of employees an employer can have whilst still being able to make payments by post?
Up to 250
What are PAYE payments?
- 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
When is PAYE operated for an employee?
When the employee is entitled to receive the payment
When is PAYE operated for a director?
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
What is tax evasion?
Illegal - failing to provide full and accurate information to HMRC
What is the Disclosure Of Tax Avoidance Schemes(DOTAS)?
Tax avoidance schemes must register with HMRC
HMRC will provide scheme number that must be quoted on tax returns
What must promoters of schemes report to HMRC?
Quarterly list of clients
What is GAAR?
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
What is an Accelerated Payment Notice (APN)?
HMRC can require users of failed schemes to make upfront payments of the underpaid/disputed tax
Who is an enabler of Defeated Tax Avoidance Arrangements?
Someone who designs, manages, markets or facilitates tax avoidance
What is the penalty for an enabler?
Penalty is anything up to the value of the fees paid to the enabler for the arrangement
What is a Disguised Remuneration Scheme? What is the charge on these?
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