Module 3 - UK Tax Compliance Flashcards
Who falls the self assessment system?
- self employed
- company directors
- those liable to higher or additional rate income tax on investment income
Can HMRC estimate how much tax you owe if no self assessment is filled?
Yes
What does the self assessment cover?
- income tax on different types of income
- class 4 NI (percentage of self employed income)
- Capital Gains Tax
When does the tax year run from and to?
April 6th - April 5th
What’s changed to VAT returns since 2019? And likewise for corporation tax for the largest companies?
Must be submitted electronically quarterly
What’s the deadline for paper returns?
31st October
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?
£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
When is self assessment tax due for complete settlement?
31st Jan the following year.
I.e. 22/23 must be paid by 31st Jan 24
Electronic self assessment returns must be complete by…
2 options
30th December if taxpayer wants underpayment to be deducted from PAYE
Or
31st Jan (along with balancing payment) if not needing underpayment deduction.
Where a return is issued late - the taxpayer has how long to file?
An extra 3 months - no matter if it goes past deadline
When are the two payments on account taken?
- 31st Jan during the tax year
- 31st July following end of tax year
When is the balancing payment taken?
31 Jan following the tax year in question
What is paid on 31 Jan? Use 23/24 as an example
- Payment on acc for current tax year (23/24)
- Balancing payment for previous tax year (22/23)
- Any CGT due (22/23?)
How are the payment on accounts calculated?
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
How is the balancing payment calculated?
Take the actual amount due - take away the already paid payment on account and balancing payment is the remainder.
What are two instances where payment on account is unnecessary? Or can be varied?
- 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.
What happens to any tax still due 30 days after the balancing payment should have been paid?
5% surcharge
Then a further 5% on anything unpaid after 6 months
What is the penalty for late submission of a return?
£100 then £10 per day up to a max of £1K
Aside from the initial penalty what additional fines are there for late self assessment submissions at 6 and 12 months?
6 months - The higher of £300 or 5% of outstanding tax
12 months - The higher of £500 or 5% of outstanding tax
How long do taxpayers have to amend their self assessments?
12 months after the deadline for submission.
(I.e. 31st Jan following year for electronic)
What would a common reason for amending a submission be?
Where a estimate was used and is now replaced for an actual figure
As compliance checks on self assessments done at random?
Yes or if there’s suspicion of wrong doing
Do HMRC have to give a reason for doing a compliance check?
No
How long does HMRC have to start an enquiry? (Self assessment)
12 months - unless fraudulent or negligent activity is suspected
Where Fraud or negligence is suspected HMRC enquiry timeframes are open ended
What is the system used by employees to submit Paye info to HMRC?
Real Time Information System (RTI)
When must an employees NI & Tax be paid to HMRC by the employer?
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:
When do both the P11d & P11d(b) need to done by?
6th July following the tax year end
When must a P60 be issued by?
31st May
What is a P11d?
Given to employees who receive any kind of benefits and lays out a value.
What is not shown on a p60
Pension contributions
What is the EU Savings directive?
The agreement between the EU and certain tax havens to share information
How much odd the withholding tax and what is it?
Where tax havens opt not to share information with the EU, they instead have to apply at 35% withholding tax.
What is the DOTAS Regime? Which taxes does it cover?
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
What is the affluence compliance team?
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.
What is GAAR
General Anti Abuse Rule - this general rule takes priority and its focus is to act as a deterrent to entering abusive arrangements.
