Reasons To Submit Your Tax Return Early!

Not quite the title “Reasons To Be Cheerful” . . . as in the Ian Dury song but I do try to make tax as relevant to you, our Abacus readers, as possible!

Yet another report has recently (22 June 2005) been released, this time from the National Audit Office (NAO) on the filing of tax returns.

It does seem to me that those that devised the current system may have made a number of assumptions about those of us required to submit tax returns.

• You are willing customers? – this must be so otherwise why would you set a fixed fine for late filing at only £100?
  
  
• You enjoy filling in forms? – otherwise why make the minimum length of a form twelve pages.
  
  
• You are unique and never work to a deadline? – otherwise why give us ten months to file (forget about filing in many cases?) the tax return form.

Now you may think I jest . . .and maybe my comments are a little tongue in cheek, but when you look at the report and its recommendations two things to me seem apparent:-

• someone in the NAO must have got a tax return to complete . . . and they didn’t like it!; and
  
  
• the NAO report strangely seems to address many of my apparently flippant comments above.

Penalties – You Are Not Willing Customers Any More

The NAO also pointed out that penalties for not filing by the deadline are limited by law to £100 or the amount of tax owed if less. Many people who file late do not therefore incur any penalty because there is no outstanding liability.

The report raised the prospect of changes to the system of penalising late filers. There have been increased use of financial penalties and a wider HMRC review of sanctions is currently underway. “In some countries, penalties for late filing are a percentage of the tax owed or are ranged according to the taxpayer’s net income” said the National Audit Report.

If this is not code for increasing the £100 to something people will pay attention to, then I do not know what is.

Complexity of Forms

Following an initial trial last year, HMRC have issued a “short tax return” to approximately 1.5m “customers” this year, leaving 7.2m (give or take one or two) to grapple with the 12-page plus form.

This start is noted in the report, but there are more things that could be done. In some countries for instance employees where the employers have filed electronically back at the beginning of April all their relevant data have pre-populated tax returns in respect of their employment figures to give them a little kick start in filling in the rest of the pages.

Working to deadlines – Filing Dates

More and more people are filing after September causing significant problems in Revenue offices. The NAO added in their report that HMRC are reviewing the possibility of introducing different filing dates for paper and electronic returns to help smooth out the peak flows of work associated with the paper returns.

There may even be incentives similar to PAYE electronic filing that have been statutorily introduced to encourage such online filing.

NAO report stated “taxpayers currently have ten months to file their returns. By contrast, some tax authorities overseas may give taxpayers only three or four months to file returns”.

Clearly, you may soon be encouraged/forced to file your Return a lot quicker than you are currently used to.

Conclusion

We at Nunn Hayward have developed a system that

• Is flexible (we communicate by mail/phone/email to suit our clients)
  
• Is efficient (our tax department have years of experience in “encouraging” our clients to provide information as soon as possible)
  
• Is effective (all Nunn Hayward clients who provide us with the information (and even some that don’t!) have with the assistance of our tax team, met 31 January deadlines historically.)

For the future, I believe it is clear there will be increased penalties and shorter time limits.

We are developing Nunn Hayward systems using new technologies that will allow you to deal with us online if you wish, whilst still keeping the “personal touch” with a dedicated staff accessible to you in our office.

Given the above, I believe there are plenty of reasons to work with us to get that dreaded tax return done now.

I shall, however leave you with one final thought.

If you have not done your tax return yet, are you certain that your tax bill due on 31 January 2006 is taken care of and will not knock your December credit card bill into a cocked hat?

As usual, if you have any queries or feedback on the above article, please do not hesitate to contact Steve Cook, Tax Partner on 01753 888211 or steve@nunn-hayward.com

OFFSHORE BANK ACCOUNT – URGENT UPDATE

Have you received a strongly-worded letter???

H M Revenue and Customs (HMRC) are planning to send letters to many people who own offshore bank accounts. This is part of an HMRC pilot exercise, designed to find the most effective way of flushing out undisclosed offshore funds.

We have been advised by our institute, The Institute of Chartered Accountants in England & Wales (ICAEW), that the letter mentions that there are plenty of people who have no intention of avoiding their tax obligations but who are under the impression that the overseas income is not taxed in the UK. The letter talks about “tax evasion” in the first paragraph and about “prosecution” in the second paragraph.

In the closing paragraph you are given 30 days to reply or they will consider opening a “Code of Practice 9” (suspected serious fraud) investigation, although the ICAEW have been advised by HMRC that the wording in these letters does not constitute the opening of an enquiry in to your tax return, unless the letter says specifically that that is what is intended! The letters are accompanied by a more detailed information sheet on the subject of offshore bank accounts.

So, what should you do in advance of, or at the latest on receipt of one of these letters? At the very least, the inference from HMRC is that they think you have an offshore account yielding interest that may not have been declared.

• Check and review your records carefully. Have you left an account dormant rather than closing it? If you have not taken professional advice, you may have completed the wrong pages on your tax return.
  
  
• Seek professional advice and peace of mind. A voluntary disclosure of innocent errors may trigger tax and interest, but penalties of 100% can be significantly mitigated.
  
  
• It goes without saying that if there was any “intent” to deceive, HMRC will review this as fraud. But even here, early action and full disclosure can very often lead to HMRC not pursuing criminal charges.

If you would like any assistance with any issues arising from the above then please contact Steve Cook, Tax Partner on either steve@nunn-hayward.com or 01753 888211, who will be glad to assist you.

Please contact us to discuss the above further

Tel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL.

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