The recent industrial action by the Revenue may be a reasonable excuse. Please see this article for more details Tax deadline day ‘leniency’ vow from HMRC.

The Revenue says it is going to be lenient, so if you are fined, lodge an appeal and give the reasons why you sent in the return late – it may save you £100.

But beware: the deadline has only effectively been put back by two days. Submissions after that date will definitely receive a penalty.

For all accounting periods ending after 31 March 2011, we have had to file Corporation Tax Returns in a different format.  It is called iXBRL and this enables a computer and a person to read the same document.

The changes also mean that you cannot send a cheque to the Revenue to settle your Corporation Tax bill.  Payments should be made electronically; if you still want to pay by cheque you must pay the bill at your bank using the bank payment slip at the bottom of your tax bill.

Full details of this can be found on the Revenue website by clicking here.

It may be possible to avoid or reduce this payment.  Here’s how.

1. If you have done your tax return to 5 April 2011 and the actual liability is less than the previous year.

2. You do not need to make a POA at all if the tax liability on the 5 April 2010 tax return was less than £1,000, or if at least 80% of the tax due for 2009/10 was paid at source (e.g. under PAYE or tax deducted from interest paid to you by banks).

3. If you have not done your 5 April 2011 tax return but expect the liability to be less, you can ask the tax man to reduce the POAs. Be warned: if it turns out you should have paid the original amounts after all, you will have to pay interest and possibly even penalties if the tax man thinks you didn’t have a good reason to reduce the payments!

4. It is too late to make pension contributions for the year to 5 April 2011, but if you have made a loss in a business since 5 April 2011, you may be able to carry those losses back to the 2011 tax year and reduce the tax liability and payments. Note that this applies only to sole trader and partnerships (including LLPs), NOT limited companies.

Please see the notes below to find out more about the rules for payments on account. For general tax-saving tips and ideas have a look at Andy Scott’s top 21 tax tips

If you’d like to speak to me or one of the team at K&H about this or anything else, please call 0118 923 5800 or email mail@kandh.co.uk

Notes

• The tax rules state that you must pay an estimate of your tax liability for the year to 5 April 2010. Half is payable on 31 January 2011 and the other half on 31 July 2011.

• The total amount you have to pay is equal to the actual liability for the year to 5 April 2010, although if the total liability for that year was less than £1,000, you don’t have to make any POAs.

• Once you have worked out your actual tax liability to 5 April 2011, you can get an immediate refund of any overpayment (with interest). Any balance payable over and above the POAs does not need to be paid until 31 January 2012.

• The POA applies only to income tax, not to any Capital Gains tax.

• If you have done your 5 April 2010 tax return and you are due to make a POA on 31 July 2011, you should have been sent a payment reminder with a payslip by HMRC in late June/early July.

• Payment can be made to HMRC by direct debit, direct payment by internet or phone, at your bank, Post Office or by post. Cheques should be made payable to ‘HM Revenue & Customs Only’ and you will need to know your UTR reference for the payment.  Further payment information can be found HERE

• If you pay late, you will be charged interest and (if more than 30 days late) ‘tax-geared’ penalties starting at 5% of the tax due.

Changes to Annual Returns (P35 forms) and starter and leaver forms
• From April 2011, employers with fewer than 50 employees must send starter and leaver forms – P45s, P46s and similar pension information – online to HMRC.

• Automatic penalties will apply to all P35 forms filed after 19 May. The ‘extra time concession’ has been withdrawn.

•  Automatic penalties will be issued if you try to file a paper P35 - all forms must be filed online.

Other potential pitfalls and penalties
HMRC will also be issuing PAYE penalties this spring for the first time in two key areas:

•  Automatic penalty notices were sent out in April to employers with 50 or more employees who had not filed starter and leaver forms online to HMRC.

The first penalties will apply for the three-month period to 5 April 2011, with further penalties being issued on a quarterly basis.

• From May this year, HMRC will start sending out penalties for late payment of PAYE. Employers will be liable for a penalty if they haven’t made PAYE payments on time, and in full, from April 2011. The size of the penalty will depend on the amounts paid late and the total number of late payments made. Penalties will be charged after the tax year-end.

Further information is available on the changes from the HMRC website at www.hmrc.gov.uk/paye or via its Employer Helpline on 08457 143 143.

For further details please see the HMRC

“Managing Deliberate Defaulters will deter people from evading tax in the future and reassure honest taxpayers that tax evaders will be dealt with.

“This government has made it clear that we will not tolerate people who refuse to pay their fair share and HMRC will pursue those who bend or break the rules,” said David Gauke, Exchequer Secretary to the Treasury.

MDD is applicable to an individual or business found to have deliberately understated their tax or VAT bill resulting in a tax loss of £5,000 or more.

“Tax cheat check-ups will involve continued and close scrutiny – it is a real deterrent. If you are thinking about breaking the rules just remember, you could end up with HMRC on your back for five years,”  said HMRC head of compliance strategy, Steve Hickman.

The Revenue hopes to raise an extra £7 billion in tax through the MDD programme.

Personally, I do worry about how a ‘tax cheat’ will be defined. Will someone making an innocent error fall within these provisions? We all make mistakes. I understand the Revenue needs to ‘police’ the tax system, but who is there to police the policeman?

A recent tribunal case has again highlighted the need to be able to identify what materials/fittings or fixtures a builder may include as supplied with his services during the construction of a new house, and hence are zero-rated. The rules also apply to DIY claimants who wish to recover VAT they have paid out.

The case revolved around roller blinds. The Tribunal ruled that roller blinds are building materials and hence the DIY claimant could recover VAT on the costs.  HMRC does not agree but is not appealing. Whether one can rely on the Tribunal ruling, given HMRC’s refusal to accept, I cannot comment. Perhaps HMRC will turn a ‘blind eye’?

There are strict guidelines as to what items can be included in zero-rated supplies relating to the construction of new dwellings. However, one very interesting matter that is not commonly appreciated is that, even if a supplier cannot zero-rate the inclusion of some materials during the construction of a new house, he may be able to zero-rate his services so long as the service element is separately itemised on the invoice and the standard rate is applied to the item. This would apply, for example, to fitted carpets.

The Revenue is looking to save £1.25 million by no longer sending copies of tax codes to accountants.

This means that we will not receive a copy of any tax codes sent to our clients. At present we receive a duplicate copy of tax codes and check they are correct and this makes sure that you pay the correct amount of tax under PAYE.

If we deal with your personal tax, in future please make sure you send us any copies of your tax code sent to you by the tax office. Due to these changes by HMRC this is the only way we can receive a copy and check to make sure you are paying the correct amount of tax under PAYE.

This also applies to any correspondence you receive from the tax office. Please send it to us and we will deal with it for you and advise you of any action you may need to take.

If you have any questions on this, please let me know.

A Google search on YouTube brings their latest offering to the top of the search list and, according to The Daily Telegraph, they have produced the most boring video on YouTube.

It looks as though very little was spent on its production. The budget obviously did not stretch to a new haircut or suit for the Revenue’s Mr Hartnett. It views like a party political broadcast from the 1970s in the days before politicians were airbrushed from various marketing and PR agencies.

From a technical, tax point of view, there is nothing wrong with the presentation; although I did for a brief minute believe I was playing Monopoly with more than one reference to ‘Go to Jail’.

Judge for yourself:

To avoid you all losing the will to live, please click on the links below to enjoy some other experiences of the tax man and accountants.

Alan Partridge and the Inland Revenue.

The Office: “The Accountants”

Let me know your YouTube favourites – email me.