Tax Return Deadlines or What the Chancellor Did Not Say?

As has become a fairly consistent pattern with Budgets, the Chancellor spent a long time chatting about general economic performance for just over an hour and on sitting down, the Inland Revenue presented the outside world with a raft of press releases, Budget notices and other statements of intent supposedly in support of what he had been chatting about.

So What Did He Fail To Mention?

Well not for this article, but he failed to mention the most significant change to the pension regime that were brought in on 6th April 2006, and the fact that some key legislation and interpretations have still to be decided upon as to how people’s pensions will be affected. However, from a taxation perspective there was one particular press release that received no publicity in the Chancellor’s speech and contains confirmation of the Governments plans to alter the tax administration system significantly in 2 years time.

A Quick Refresher

Tax Returns as most people will be aware are completed by reference to the tax year ended 5th April. The deadlines for submission are the following 31st January i.e. 10 months.

There are a number of advantages for early submission as well as submission online that have been introduced over the years since self assessment was introduced and this regard I would refer to you our summer 2005 article urging early completion of Tax Returns last year!

So Why All the Secrecy!

The Revenue had instructed Lord Carter to lead a review of Revenue online services. This report was produced and released at the same time as the Budget notices. It stretches to some 40 odd pages. Due to uproar in the accountancy profession, on behalf of clients, Lord Carter announced last week his intention to reconsider some aspects.

Notwithstanding this latest consultation, what the report says, and what the Budget Statement confirms the Government are working towards is a change to the deadlines for completion of Tax Returns. The key features of this proposed new system are as follows:-

The deadline for filing a personal Tax Return will be split into two.

1. For paper Returns you have until 30th September following the tax year end.
   
   
2. For online forms you will be given until 30th November.

Agents (such as ourselves) who currently file online as well as in paper will not be able to use substitute returns produced from specialised tax packages. We will either need original returns issued by the Revenue, or have to file online.

What Does This Mean For The Man In The Street?

It has been a noticeable feature within our firm’s client bank, as well as nationally, that the number of people waiting until late December/early January to file their personal Tax Returns has been increasing over the years.

The reduction from 10 months to 8 months for getting information compiled and either prepared or submitted to your accountant for completion is therefore going to be quite a tight timing exercise in future.

Whilst the statutory deadlines will not be imposed until the 2007/08 Tax Return (i.e. 30th September/30th November 2008), bearing in mind that people are creatures of habit, it is important that new habits are formed as soon as possible in advance of these deadlines to ensure that you do not fall foul of the penalty/interest regime that will now kick in that much earlier.

Nunn Hayward’s Position

Whilst you may have seen in the press a number of major firms and high profile accountants suggesting that appeals will be mounted against these changes, it is our expectation at Nunn Hayward, that they will go through pretty much unchanged in due course.

We at Nunn Hayward are already geared up to cope with submission of returns online and have a highly motivated and technically capable team of tax personnel to handle Tax Return processing and the provision of related advice.

• We are flexible (We communicate by mail, telephone and email to suit you).
  
• We are efficient (Our Tax Managers have years of experience in encouraging “Our clients to provide information as soon as possible”).
  
• We are effective. (All Nunn Hayward clients who provide information to us (and even some that don’t!) have with the assistance of our tax team met deadlines in the past.
  
• We shall be liasing with our clients specifically over the coming months to ensure there are no nasty surprises down the line for them, and if you believe we could help you with your own reporting requirements, we would be pleased to discuss this with you.

Should you have any queries or feedback, please do not hesitate to contact Steve Cook, Tax Partner on 01753 888211 – email steve@nunn-hayward.com.

We have recently been very busy helping a number of different clients through their exit strategy. It is fascinating to see the different approach, in particular, on due diligence applied in each scenario.

As an example, we had:

1. A venture capitalist acquire a 40% interest in a client for approximately £4m. They adopted a very comprehensive approach, including detailed accountants reports into projections and in particular the financing of borrowing. They involved psychometric testing for all senior staff and took a very robust attitude towards the legal side.
   
   The costs of the whole transaction reflected this comprehensive approach, but at the end of the day the transaction went through and the buyers and sellers were satisfied.
   
   
2. We had the sale of a small retail chain of shops sold to one of the large nationals for approximately £8m. Their view was very different insofar as although the asset they were buying was largely an intangible asset in terms of the goodwill associated with the shops, they felt that they were well placed to judge this internally and adopted no commercial due diligence outside of their own company. The legal work too was cut to a minimum.
   
   Again the transaction went through successfully and all sides were pleased with the outcome.
   
   
3. We acted for a company in the event planning industry, which was sold for approximately £1.6m. This was sold to another private company and again the approach to the due diligence exercise was completely different, with the emphasis much more on the personnel of the two companies spending a lot of time together discussing the merits of joining forces and where the company would go in the future.
   
   Again the transaction went through successfully.

In all three of the above cases, the owners opted for securing the lowest possible Capital Gains Tax
rate of 10% giving the ability to do with as they wished with the balance; the alternatives reviewed included VCT/EIS, Film Partnerships and bespoke tax planning schemes. However at the end of the day, the ability to retain over 90% of the proceeds outside complex structures won through in their cases. There is no right answer, but our clients were able to review all the options and make an informed choice before sales.

The purpose in this article really is just to show that there is no right way. If you are looking at an exit strategy in the future please do not hesitate to contact us and we hope that our experience in all these and many other areas will be of use to you in maximising your return and making the process as smooth as possible.

If you have any queries about this article please contact Ian Nunn, Partner, at ian@nunn-hayward.com or tel: 01753 888211.

Tax Freedom Day, the date when according to the Adam Smith Institute, taxpayers can start working for themselves and not the government was three days later this year.

In 2006 it took until 3rd June for UK taxpayers to reach the crucial date in the calendar, which is three days later than in 2005 and nine days later than when the current government came to office in 1997.

If you would to gain more tax freedom days why not talk to Steve Cook, Tax Partner at
steve@nunn-hawyard.com or on 01753 888211.

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.

© 2006 Nunn Hayward. All rights reserved