Paying Tax

Question 1

Who does Self Assessment apply to: (5)

Answer 1

• Self Employed
• Co Directors
• Property or Investment income
• Child benefit charge
• chargeable gains

Question 2

What 3 items are paid in 3 instalments

When are 3 instalments made

Answer 2

• Income tax, CB charge and class 4 paid in 3 instalments
• 1st payment on account -JAN 31 of current tax year - half previous year liability
• 2 nd Payment 31 July following current tax year - half previous years liability
• balancing payment Jan 31 following ends of tax year - class 2 and CGT paid at same time as balancing payment.

Question 3

Penalties for unpaid tax

• Tax unpaid for 30 days after balancing payment due
• Return not submitted

Answer 3

• 5% if not paid within 30 days of balancing payment due
• Further 5% if not paid further 5 months
• further 5% after further 6 months
• Return not submitted -£100 if not by 31st Jan following end of tax year
• More than 3 months late £10 daily up to 90 days (even if no tax due~)
• More than 6 months £300 or 5% tax outstanding whichever higher
• More than 12 months late -similar

Question 4

Directors PAYE
PAYE

What does K. Code mean

What is RTI software
When does employer pay tax/NI to HMRC
Penalties for late submission

Answer 4

• earliest of date payment made, date director becomes entitled to payment, date credited in company books or date when payment agreed

RTI =Real time information used automatically to report pay and deductions to HMRC

Employer pays all tax,NI to HMRC by 22nd following end of tax month 19th if not paid electronically

penalty 3 day grace period
No penalty for 1st late submission, then £100 -£400 (depends on no employees)
- additional 5% when 3 months late
- penalty for inaccurate submission
More...

Question 5

General anti abuse rule (GAAR)

What for
What covered

4 questions
Who provides view etc

Answer 5

• aims to counteract tax advantages arising from abusive arrangements
• applies to income tax, corporation tax, CGT, IHT, petroleum revenue tax, SDLT, NICs
• only applies 1, is there a tax arrangement 2. Does the arrangement cover one of taxes covered by GAAR 3. Is the tax advantage the main purpose of arrangement 4. Is arrangement,ent abusive
• Independant advisory panel gives opinions on cases. Determines its use reasonable and why
  Provides advice to HMRC and tax payers
  Any tax ad
  Vantages counteracted by just and reasonable adjustments.

Question 6

DOTAS

Disclosure of tax avoidance schemes

Answer 6

• Crack down on aggressive tax avoidance schemes
  Provider must register scheme with HMRC. Give quarterly list of those using
• Being registered is no indication ok
• Once disclosed to HMRC ,allocated a reference number,provider then advises users of scheme and they put on tax return
• If defeated in court,HMRC issue notice and expect all tax to be paid (penalty up to half tax owed)
• Rules cover PAYE, CGT, SDLT, IHT not vat
  Taxpayer using scheme must disclose to HMRC. Penalty up to £5k

Question 7

• Tax mitigation
• Tax evasion
• Tax avoidance

Answer 7

• Tax mitigation acceptable. Arrange affairs in legal way to pay lowest amount of tax. MAking use of allowances and reliefs
• Tax evasion is illegal. Deliberately not paying tax. EG rely on HM

Question 8

• When does paper return need to be filed

- When due

Answer 8

• Paper 31st October following end of tax year or 3 months after issue if demand sent after 31 July
• Online 31st January ( or 3 months after demand)
• 1st payment on account: By 31st Jan in tax year - for 2019/20 by 31 Jan 20
  Amount due is 50% of previous year’s liability, class 4 and high income child benefit tax charge
• 2nd payment on account by 31st July following end of tax year 19/20 would be July 31 2020