Module 3 - UK Tax Compliance

Question 1

Who falls the self assessment system?

Answer 1

• self employed
• company directors
• those liable to higher or additional rate income tax on investment income

Question 2

Can HMRC estimate how much tax you owe if no self assessment is filled?

Answer 2

Yes

Question 3

What does the self assessment cover?

Answer 3

• income tax on different types of income
• class 4 NI (percentage of self employed income)
• Capital Gains Tax

Question 4

When does the tax year run from and to?

Answer 4

April 6th - April 5th

Question 5

What’s changed to VAT returns since 2019? And likewise for corporation tax for the largest companies?

Answer 5

Must be submitted electronically quarterly

Question 6

What’s the deadline for paper returns?

Answer 6

31st October

Question 7

As long as the payment date is hit - an under payment of up to how much can be collected through adjustment to a PAYE code?

Answer 7

£3000 - or up to £17000 for higher earners on a sliding basis.

• must already collect tax via PAYE & earn less than £6515 as self employed

Question 8

When is self assessment tax due for complete settlement?

Answer 8

31st Jan the following year.

I.e. 22/23 must be paid by 31st Jan 24

Question 9

Electronic self assessment returns must be complete by…

2 options

Answer 9

30th December if taxpayer wants underpayment to be deducted from PAYE

Or

31st Jan (along with balancing payment) if not needing underpayment deduction.

Question 10

Where a return is issued late - the taxpayer has how long to file?

Answer 10

An extra 3 months - no matter if it goes past deadline

Question 11

When are the two payments on account taken?

Answer 11

• 31st Jan during the tax year
• 31st July following end of tax year

Question 12

When is the balancing payment taken?

Answer 12

31 Jan following the tax year in question

Question 13

What is paid on 31 Jan? Use 23/24 as an example

Answer 13

• Payment on acc for current tax year (23/24)
• Balancing payment for previous tax year (22/23)
• Any CGT due (22/23?)

Question 14

How are the payment on accounts calculated?

Answer 14

They are last years liability split in two.

I.e if last year was £10,000 liability the two payments on account this year would be £5k each

Question 15

How is the balancing payment calculated?

Answer 15

Take the actual amount due - take away the already paid payment on account and balancing payment is the remainder.

Question 16

What are two instances where payment on account is unnecessary? Or can be varied?

Answer 16

• If less than £1K was laid previous year
• if taxpayer believes it could result in an overpayment - perhaps because income has fallen
• should note Interest may be due if it turns out a payment on account should have been made.

Question 17

What happens to any tax still due 30 days after the balancing payment should have been paid?

Answer 17

5% surcharge

Then a further 5% on anything unpaid after 6 months

Question 18

What is the penalty for late submission of a return?

Answer 18

£100 then £10 per day up to a max of £1K

Question 19

Aside from the initial penalty what additional fines are there for late self assessment submissions at 6 and 12 months?

Answer 19

6 months - The higher of £300 or 5% of outstanding tax

12 months - The higher of £500 or 5% of outstanding tax

Question 20

How long do taxpayers have to amend their self assessments?

Answer 20

12 months after the deadline for submission.

(I.e. 31st Jan following year for electronic)

Question 21

What would a common reason for amending a submission be?

Answer 21

Where a estimate was used and is now replaced for an actual figure

Question 22

As compliance checks on self assessments done at random?

Answer 22

Yes or if there’s suspicion of wrong doing

Question 23

Do HMRC have to give a reason for doing a compliance check?

Answer 23

No

Question 24

How long does HMRC have to start an enquiry? (Self assessment)

Answer 24

12 months - unless fraudulent or negligent activity is suspected

Where Fraud or negligence is suspected HMRC enquiry timeframes are open ended

Question 25

What is the system used by employees to submit Paye info to HMRC?

Answer 25

Real Time Information System (RTI)

Question 26

When must an employees NI & Tax be paid to HMRC by the employer?

Answer 26

Within two weeks of the end of the tax month.

Tax month ends on the 5th - two weeks later is the 19th.

Where payment is made electronically, an extra 3 days are allowed as no time is wasted waiting for it to clear:

Question 27

When do both the P11d & P11d(b) need to done by?

Answer 27

6th July following the tax year end

Question 28

When must a P60 be issued by?

Answer 28

31st May

Question 29

What is a P11d?

Answer 29

Given to employees who receive any kind of benefits and lays out a value.

Question 30

What is not shown on a p60

Answer 30

Pension contributions

Question 31

What is the EU Savings directive?

Answer 31

The agreement between the EU and certain tax havens to share information

Question 32

How much odd the withholding tax and what is it?

Answer 32

Where tax havens opt not to share information with the EU, they instead have to apply at 35% withholding tax.

Question 33

What is the DOTAS Regime? Which taxes does it cover?

Answer 33

Disclosure of Tax Avoidance Scheme Regime

It is not a legal requirement for schemes that offer tax avoidance to register such schemes with DOTAS - the taxpayer must then give the reference number on their tax return.

Covers income tax, corporation tax, CGT, IHT, NI

Question 34

What is the affluence compliance team?

Answer 34

Team of around 300 inspectors who deal with individuals with wealth between £2.5 & £20m and that pay the 45% tax rate - to ensure every thing is above board.

Question 35

What is GAAR

Answer 35

General Anti Abuse Rule - this general rule takes priority and its focus is to act as a deterrent to entering abusive arrangements.