Entries from January 2007 ↓

Pros

- The deadline to have any tax you owe collected through your tax code is extended to December 30.
- The information is stored on a server so that you can dip in and out of your return as and when you want to.
- You receive immediate confirmation that your tax return has been submitted. The Taxman cannot claim that you did not file it or that it has been misplaced.

Cons

- There are no incentive payments available for filing personal tax returns online.
- You do not actually see which boxes are being completed on-screen. The boxes are completed by the way in which you answer the questions.
- You need to remember your ID number, which is not the shortest of codes.

The new CIS scheme is being introduced with effect from 6 April 2007.

HMRC has announced that the standard tax to be deducted will increase from 18% to 20% (probably to help with their cash flow). The deduction rate for unregistered subbies has been set at 30%.

If you haven’t filed your tax return yet you may be set to experience some difficulties.

The Taxman is so far behind with processing paper returns that even if you file today it will not be processed for several weeks which could result in false penalties being levied. For further details see this article from The Times.

If you file online be prepared for significant delays and down time as we near the deadline of 31 January 2007. We recommend filing at the evening or weekends to avoid peak traffic times.

See also our previous postings - avoiding penalties and getting proof of delivery.

Heres a useful Accounting Web article on how to reduce the chances of the Taxman selecting you for an investigation.

Should you be unlucky enough to be chosen, here are a few tips to level the playing field:
- explain to the Taxman how your business works - this will often reduce the number of queries raised
- offer access to your records at your accountants’ premises and ask him to let you know which papers he requires copying. Don’t let him take whole files away otherwise he could pour over them for hours analysing every small comment on every page.
- if computer files are requested give him printouts of the requested reports - giving him the data in electronic format would enable him to interrogate the data further
- if any difficult questions are asked simply say, you don’t know and ask him to put his request in writing. This gives you time to give a more considered response.

You’re responsible for submitting your annual tax return on time - if you’re late you could get fined.

If you pay your annual tax bill late you are also likely to get fined. However, a recent case (Rowland v HMRC) says that if you have a reasonable excuse for paying your tax late, a penalty should not be charged.

Therefore if the Taxman says you’ve underpaid your tax but you did pay the amount advised by your accountant quote the Rowland case to get out of the fine.

Recently, the Taxman stopped giving receipts for hand delivered tax returns. As we all know, documents frequently go missing in tax offices resulting in penalties being levied for alleged non submission. Before we could avoid the penalties by showing a receipt as proof of delivery, but now this option does not exist.

So, how can we avoid filling Gordon Brown’s coffers with not only tax payments but penalty monies too?

The Taxman has now confirmed that if you send your return by recorded delivery they will sign for it and this can serve as proof of delivery instead. Whilst we recommend filing online as much as possible (a receipt should be emailed to you) it is not always possible. In which case, we recommend sending it recorded delivery.