Personal Tax Administration

Question 1

When must a tax payer notify HMRC liability to CGT or income tax? (When do you have to let HMRC know that you have to pay some tax)

Answer 1

By the 5th of October following the end of tax year.

Question 2

What are the penalties for failure to notify HMRC about registering for income/CGT tax liability?

Answer 2

30% potential lost revenue if non deliberate failure to notify
70% potential lost revenue if deliberate failure to notify
100% if concealed on purpose

Penalties can be reduced if taxpayer makes unprompted disclosure.

Potential lost revenue is the tax that HMRC would have missed out on.

Question 3

What are the filing dates for tax returns?

Answer 3

Paper returns must be filed by the 31st of October and electronic returns must be filed by 31st January following the end of the tax year.

Question 4

What are the penalties for late filing?

Answer 4

0 - 3 months = £100
3 - 6 months = Further penalty £10 per day (max 90 days)
6 - 12 months = Greater of 5% of unpaid tax and £300
12 months+ = Further penalty: greater of % unpaid tax and £300 (conduct based 30 = good, 70 = bad and 100 = purposeful concealment.

Question 5

How long must tax records be kept for?

Answer 5

Tax records must be kept for 5 years after the 31st January following the end of the tax year.

Question 6

What is the maximum penalty for missing tax years?

Answer 6

The maximum penalty is £3000 per missing year.

Question 7

How does the payments on account s process work?

Answer 7

Tax payers must pay 50% of the previous years tax liability on the 31st January following the end of the period and the remaining 50% on the 31st July.

Question 8

When are any balancing payments due?

Answer 8

Any balancing payments will be payable by 31 January following the end of the tax year. (1 year after 1st payment on accounts)

Question 9

When is CGT due?

Answer 9

CGT is due on the 31st January following the end of the tax year.

Question 10

What are the penalties for unpaid tax?

Answer 10

Less than 30 days late then = 0%
30 days to 6 months late = 5% of unpaid tax
Between 6 and 12 months = 10% of unpaid tax
More than 12 months after penalty date = 15% of unpaid tax

Question 11

What are the steps to determine if an individual is UK resident or not

Answer 11

Perform automatic overseas test - if test is passed then the individual is Non UK resident.

Perform automatic UK test - if test is passed then the individual is UK resident.

Perform sufficient ties test - if ties are reached then UK resident.

Question 12

What are the Automatic overseas tests?

Answer 12

In the UK for less than 16 days in the tax year and been UK resident in 1 or more of the 3 previous tax years.

In the UK for less than 46 days and not been resident in either of the past 3 tax years.

Works full time overseas and not in the UK for more than 90 days during the tax year.

Question 13

What are the Automatic UK tests?

Answer 13

In the UK for 183 days during the tax year.

In the UK for 30 days or more and only home is the UK.

Works full time in the UK.

Question 14

What are the sufficient ties tests?

Answer 14

Having close family (spouse/ civil partner or child)
Having a house in UK, which is available for at least 91 days in the tax year and spend at least 1 night.
Doing substantive work in the UK (40 days or more is substantive.
Being in the UK for more than 90 days during either of the 2 previous tax years.
Spending more time in the UK than in any other country during the tax year.

Question 15

What is the split year treatment?

Answer 15

The split year treatment is when an individual can split the tax year into a UK part (taxable) and an Overseas part (not taxable) if they are UK resident.

Question 16

When does the split year treatment apply to an individual leaving the UK? (Resident to Non resident)

Answer 16

The individual leaves the UK to begin fulltime work overseas.
The individuals spouse leaves the UK to work fulltime overseas and the spouse follow then to live overseas.
The individual leaves the UK to live abroad, sells their UK house, spends minimal time in the UK and establishes ties with new country.

Question 17

What is the split year treatment for an individual coming to the UK? (Non resident to Resident)

Answer 17

Individual comes to the UK, acquires home in the UK and the does not have any sufficient ties to the UK in order to be UK resident prior to obtaining the UK home.

The individual comes to the UK for full time work for a period of at least a year and the individual does not sufficient ties to the UK in order to be UK resident before coming to the UK.

The individual returns to the UK after a period of working full time overseas.

Question 18

What are the 2 categories for an individual to be considered deemed domiciled?

Answer 18

Formerly UK resident: born in the UK, has UK domicile origin and UK resident in relevant tax year.

Long term UK resident: UK resident for 15 of the previous 20 tax years. (However will not be deemed domiciled if they were not UK resident in a tax year after 5/4/17.

Question 19

What income do UK resident, UK domiciled and UK deemed domiciled have to pay tax on?

Answer 19

UK resident, UK domiciled and UK deemed domiciled have to pay tax on UK income and overseas income.

Question 20

How is the income from non residents taxed?

Answer 20

Taxed on UK income only
No Personal allowance but can claim if European citizen
Gains not taxable even if UK assets unless: used in UK branch/agency, UK land and temporarily non resident

Question 21

What is the arising basis?

Answer 21

UK income tax on income as it arises.
If UK resident/domiciled or deemed domiciled and unremitted overseas income and gains are less than £2000 then the remittance basis is automatically applied and less an election is made to use the arising basis.

Question 22

What is the remittance basis?

Answer 22

Pay UK IT on UK income and on overseas income only if remitted to the UK.

If unremitted income gains are less than £2000 then RB applied automatically and individual keeps personal allowance and AEA. There will also be no remittance basis charge.

If unremitted gains are more than £2000 and you use the arising basis then you get to keep UK PA and AEA, Avoid RBC and pay UK IT on worldwide income as they arise.

If unremitted income gains are more than £2000 and you use the remittance basis then you lose UK PA and AEA. You also pay the remittance basis charge of 30k if UK resident for 7 out of the previous 9 tax years. The remittance basis charge will increase to 60k if you are UK resident for 12 out of the last 14 tax years

Only pay IT on income and gains that are remitted to the UK.

Question 23

When is CGT due on the disposal of UK residential properties?

Answer 23

CGT is due 30 days from the date of disposal.