Tax Admin for individuals

Question 1

What is the filing date of individuals for paper and electronic?

Answer 1

31 October 2020 for paper

31 Jan 2021 for electronic

Question 2

What is the payment date of capital gains tax for individuals?

Answer 2

31 Jan 2021

Class 2 NIC and capital gains tax are collected via self-assessment and are payable ALL IN ONE payment on 31 January (2021) following the end of the tax year, along with the balancing payment for Income tax and class 4 NIC.

Payments on account are not required for class 2 NIC and capital gains tax

Question 3

What is the payment date of class 2 National Insurance for individuals?

Answer 3

31 Jan 2021

Class 2 NIC and capital gains tax are collected via self-assessment and are payable ALL IN ONE payment on 31 January (2021) following the end of the tax year, along with the balancing payment for Income tax and class 4 NIC.

Payments on account are not required for class 2 NIC and capital gains tax

Question 4

What is the payment date of class 4 National Insurance and Income tax for individuals?

Answer 4

These are paid on account

✓ 1st POA 31/1/2020 within the tax year
✓ 2nd POA 31/7/2020 following the tax year
✓ Balancing payment 31/1/2021 following the tax year.

The payments on account are equal to 50% of the relevant amount for the previous year. First 2 are 50% and remaining is the balancing amount

Tax liability (IT +Class 4)
Less: PAYE
= Relevant earnings

Question 5

Under which circumstances are no POA required for Class 4 and IT?

Answer 5

Payments on account are not required if the relevant amount of PREVIOUS YEAR falls below a de minimis limit of £1,000.

Also, payments on account are not required from taxpayers who paid 80% or more of their tax liability for the PREVIOUS year through PAYE or other deduction at source arrangements.

Question 6

For individuals how long should you keep records for and what is the penalty?

Answer 6

▪ 5 years after the 31st January 2021 following the tax year (Filing date) if the tax payer has a business. Till 31 Jan 2026

▪ 1 year after the 31st January following the tax year otherwise 31 Jan 2022

£3,000

Question 7

What are the late payment consequences for individuals and corporations?

Answer 7

▪ Interest;
- 3.25% per annum (Date the tax was due up to the payment date)

▪ Penalty;

• More than 1 month late= 5% tax due
• More than 6 months= +5%
• More than 12 months= +5%

Question 8

What are the late filing consequences for individuals?

Answer 8

The initial penalty for late filing of the return is £100.
After the end of the period of 3 months a penalty of £10 is payable for a maximum of 90 days

After 6 months a further penalty is payable, this penalty is the greater of:
▪ 5% of the tax liability
▪ £300

After 12 months starting a further penalty is payable, however this is determined in accordance with the taxpayer’s conduct.

1) Not deliberate- 5% (min 300)
2) Deliberate - 70% (min 300)
3) Deliberate with concealment 100% (min 300)

Question 9

What are the dates of notification of chargeability to HMRC?

Answer 9

• Within 6 months from the end of the tax year in which the liability arises
  i. e. by 5th October 2020 for 19/20

Question 10

Within how many months can the return be amended by HMRC and the taxpayer?

Answer 10

HMRC- within 9 months from when the ACTUAL filing was done. so if it was done early on 1st Jan, due date is 31 Sep

Taxpayer themselves can amend within 12 months of the 31 January filing date. So 19/20 Amendments must be made by 31 Jan 2022

Question 11

What kind of tax is Inheritance tax?

Answer 11

Capital tax

Question 12

If a client is refusing to disclose a chargeable gain to HMRC what is unacceptable action and what is acceptable?

Answer 12

Informing HMRC of the non-disclosure and warning the client that your firm will be reporting the non-disclosure

Reporting under the money laundering regulation, advising client to disclose, ceasing to act for the client and notifying HMRC of ceasing to act on their behalf

Question 13

What is extra statutory concession?

Answer 13

a provision for the relaxation of the strict application of the law where it would lead to anomalies or cause hardship

Question 14

what is the time limit for compliant checks done by HMRC?

Answer 14

HMRC must give written notice before commencing a compliance check. The written notice must be issued within 12 months of the ACTUAL date the return is filed with HMRC

So if it was filed early on 1st Jan then it is due on 1st of Jan- NOT 31 Jan

Question 15

What is the lowest amount to which an individual can make a claim to reduce each of their POA for the tax year 19/20 without being charged interest?

Answer 15

A taxpayer can make a claim to reduce their payments on account if they expect their actual income tax and class 4 liability for the tax year to be lower than the previous tax year. The lowest amount to which you can make a claim to reduce each of the payment on account for the current year without being charged interest is to divide by 2 the expected liability for the current tax year 19/20.

The payment on account will each be 50% of the expected liability for the tax year 19/20 £5000/2= 2500

Question 16

When must a company submit Income tax and NIC information to HMRC?

Answer 16

Under Real time information PAYE system, a company must submit income tax and NIC information in respect of the monthly salary payments to HMRC electronically by the 15th of each month

Question 17

When must a company pay Income tax and NIC information to HMRC?

Answer 17

The due date for electronic payments is 17 days after the end of the tax month i.e. by the 22nd of the month following the month that salaries are paid.

Employers with more than 250 employees MUST pay PAYE electronically. Smaller employers have the choice

Question 18

State the implications if a person made a claim to reduce their payments on account for the tax year 19/20 to nil?

Answer 18

If Pi’s payment on account for the tax year 2019/20 were reduced to £0, then she would be charged late payment interest on the payments due of £1,860 from the relevant due date to the date of payment

A tax geared penalty will be charged as the claim to reduce the payments on account to £0 would appear to be made fraudulently or negligently

Question 19

Claim DEADLINE to reduce POA

Answer 19

Must submit a claim to reduce POA for tax year 19/20 by 31 Jan after the tax year so 31 Jan 2022.

Question 20

When a question says, if something could’ve been transferred to the partner how much would this have saved, how do you calculate this?

Answer 20

Think of it as the difference between what would’ve been paid and what could’ve been paid.

E.g. Higher rate husband transferring his 5k savings to his BRB wifewho has none. And the wife transferring her 23k dividend her husband who has none.

The first 1k would be Nil rate for his wife but for him would still be at 45%. The remanining 4k, he would’ve still paid 45% but she would’ve paid 20% - the difference is 25% so that is how much would’ve been charged.

Dividend, she would’ve been charged 7.5% on the excess but the husband would be 0 from the £2k nil rate band. So that is how much would’ve been saved.

Interst income £1k x 45%
Interst income £4k x 25%(45%-25%)
Dividend income £2k x 7.5%

Question 21

What is general anti abuse rule?

E.g. If someone doesn’t disclose of a gain regarding the disposal of property, how will HMRC view this?

Answer 21

General anti abuse rule is a rule to counter artificial and abusive schemes where arrangements (which cannot be regarded as a reasonable course of actin) are put in deliberately to avoid tax.

HMRC will view this as tax evasion as his tax liability would’ve been understated in that year.

Question 22

E.g. If someone doesn’t disclose of a gain regarding the disposal of property, how will you as a trainee accountant deal with this?

Answer 22

Trained accountant should be expected to act with honesty and integrity. So Ernest should therefore be advised to disclose details of the capital gain to HMRC.

If this is not made by Ernest, trainee would be obliged to report under the money laundering regulations and you should consider ceasing to act for that company. In these circumstances you would be advised to notify HMRC that you no longer act for him although you should not provide any reason for this.

Question 23

Explain the penalties which your firm as tax agents could be liable to if a compliance check is commenced by HMRC and the firm fails to supply the information requested by HMRC?

Answer 23

Civil penalty may be payable by the firm if they have engaged in dishonest conduct, which may be the case if they failed to supply the information HMRC have requested. Potential penalty is up to £50k

Question 24

What are the possible reasons why a compliance check would be made?

Answer 24

HMRC have a right to carry out compliance check as regards the completeness and accuracy of any return as such check may be made on a completely random basis. However, these checks are generally carried out because of a suspicion that income has been under declared or because deductions have been incorrectly claimed.

Question 25

What is the advantage of choosing 5th April as accounting date rather than a date early in the tax year such as 30th April

Answer 25

The application of the basis period is more straight forward. There will also be no overlap of profits.

And, the basis period in the year of cessation will be a maximum of months in length, rather than the potential months that could arise with a 30th April year end.

Question 26

How does the government encourage individuals to save?

Answer 26

By offering tax incentives such as tax free individual savings accounts, tax relief on pension contributions. In addition, the savings income nil rate bands encourage basic and higher rate tax payers to save by providing tax free savings.

Question 27

How does the government encourage individuals donate?

Answer 27

It is encouraged by giving individuals tax relief on donations made through gift aid scheme or the payroll deduction scheme.

Question 28

How does the government encourage individuals to build business and invest in plant and machinery?

Answer 28

Entrepreneurs are encourage to build their own business through various capital gains tax reliefs and entrepreneurs reliefs. Investment in plant and machinery is encouraged through capital allowances.

Question 29

What is due on the 31 Jan 2021?

Answer 29

Balance of POA of Class 4 & Income tax + Class 2 and Capital gains tax

Question 30

What does the first tier tribunal deal with?

Answer 30

( Default paper cases
Basic cases
standard cases
complex cases

Question 31

What are default paper cases

Answer 31

simple appeals e.g. against a fixed penalty

no hearing provided both side agrees

Question 32

What are basic cases

Answer 32

straightforward appeals
minimal paper work
short hearing

Question 33

What are standard cases

Answer 33

more detailed consideration of issues

more formal hearing

Question 34

What are complex cases

Answer 34

may be heard by first tribunal

usually however heard by upper tribunal

Question 35

What does the Upper tier tribunal deal with?

Answer 35

complex cases

• requiring detailed specialist knowledge
• formal hearing

Question 36

If you’re not happy with upper tribunal, how is this dealt

Answer 36

it can be appealed to the court of appeal but only on grounds of a point of law

Question 37

What are the penalties for late submission of real time informatoin

Answer 37

no penalty for the first month that is paid late. thereafter a penalty of 100-400 is applied for subsequent payment.

Question 38

What is the form for when employee leaves

Answer 38

P45

Question 39

What is the form for end of year summary and the date

Answer 39

P60 and provided to employee by 31 May

Question 40

What is the form for summary of benefits

Answer 40

P11D Provided to employee by 6th July