Chapter 22: Obligations for individuals

Question 1

Filing returns for self assessment

Paper returns
Online returns

Answer 1

Paper returns later of:
31st October after tax year
3 months after return issued

Online
31 Jan after tax year
3 months after the return issued

Question 2

HMRC to correct errors on tax return
Taxpayer has how long to inform HMRC that the return should be amended

Answer 2

HMRC has 9 months from receipt to correct errors

Tax payer has 12 months after due filing date to inform HMRC that return should be amended

Question 3

If a taxpayer does not receive a return, he must notify HMRC by what date that he has chargeable income unless:
-There is no CGT and
-No higher rate or additional rate tax is due and
-Either income is covered by the personal allowance or all tax due has been deducted at source

Answer 3

5 October

Question 4

What tax must be paid by 31 Jan

Answer 4

Income tax
Class 4 NIC
Class 2 NIC
CGT

Question 5

POA will be required if tax and class 4 NI for the previous year exceeds the income tax and class 4 NIC deducted at source. This is called the relevant amount.

Answer 5

POA each = 50% of the relevant amount for the previous year.

Question 6

POA not required when

Answer 6

Relevant amount is below £1000

At least 80% of last year’s tax was paid at source

Question 7

Taxpayer reducing POA to a stated amount, or nil, if he expects a lower liability.

Answer 7

Taxpayer must state why the liability is expected to be lower

Interest is charged if the reduced POA turns out to be too low

Penalties if reduction was due to fraud or negligence

Question 8

Due dates for POA

Answer 8

1. 31/01 in tax year
2. 31/07 after tax year
3. • Final payment if o/s liability: 31/01 after tax year

Question 9

POA for class 2 and CGT

Answer 9

CGT and class 2 NIC is due on 31 Jan after the tax year in which the gains/income occur

No POA for class 2 and CGT (unless residential property)

Question 10

POA for disposals of residential property

Answer 10

POA must be made within 60 days of completion where CGT is payable on the disposal of residential property - return must be submitted to HMRC at the same time

Calculation of the POA takes into account the AEA, capital losses incurred in the tax year prior to the disposal of the residential property plus b/fwd capital losses

Capital losses after disposal ignored

Question 11

Penalties for late payment

Answer 11

In addition to interest, penalties may be charged for late payment of tax.

Penalties apply to:
-Balancing payments of income tax, class 4 NIC, class 2 and CGT
-Tax due on amendment of self-assessment
-Tax due on discovery assessment

There are no penalties on late paid POA

Length of delay:
More than 1 month - 5% of tax unpaid at penalty date
More than 6 months - Additional 5%
More than 12 months - additional 5%

Question 12

Penalties for late filing (maximum)

Answer 12

1 day - Fixed £100 penalty

3 months - £10 per day for max 90 days, in addition to the £100 fixed penalty

6 months - Greater of 5% of the tax liability and £300, and above penalties

After 12 months -
Deliberate and concealed - 100% of potential lost revenue or £300
Deliberate not concealed - Greater of 70% of PLR or £300
Other eg careless - Greater of 5% of PLR and £300

Question 13

Record keeping

Answer 13

Income tax and CGT

5 years after 31 Jan following the tax year - if in business

1 year after 31 jan if not in business

VAT - 6 years

max penalty - 3000 for each failure per tax year