The filing date for the 2011 tax return is 31 January 2012. If the return is late, penalties will apply as follows:

• an initial £100 fixed penalty – even if no tax is due or all the tax is paid on time
• after 3 months, daily penalties of £10 per day, up to a maximum of £900
• after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater
• after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.

This means that if you do not send in your 2011 tax return until 30 September 2012, you will have penalties to pay of £1,300 even if no tax is payable.

In addition there will be late payment surcharges as outlined below.

Do not forget to pay your tax bill on 31 January 2012.

Late paid tax will be subject to an interest charge of 3%. For example, if you pay a tax bill of £2,000 ten days late, then you will owe interest of £2,000 x 3% x 10/365 = £1.64.

Beware of late payment surcharges if you pay late tax due from the 2010/11 tax year as surcharges apply.

These are 5% of the tax unpaid at:

• 30 days
• 6 months, and
• 12 months

Interest is charged in addition to these penalties.

For example, if you owe tax of £10,000 from 2010/11 due on 31 January 2012 which is not paid until 1 August 2012, you will owe:

Tax £10,000
Initial surcharge £10,000 x 5% = £500
Second surcharge £10,000 x 5% = £500
Late payment interest £10,000 x 3% = £300 x 182/365 = £149.58
Total owing £11,149.58

Details on how to pay tax can be found by clicking on: http://www.hmrc.gov.uk/payinghmrc/selfassessment.htm

Tax can also be paid over the phone using your debit card. Call 0845 305 1000 and give details of your card number, tax reference and the amount you wish to pay.

Further details can be found at www.hmrc.gov.uk/sa/deadlines-penalties.htm

If you have still to file your tax return, then please read on. You need to act quickly to avoid having to pay the following penalties.

The filing date for the 2011 tax return is 31 January 2012. If the return is late, penalties will apply as follows:

• an initial £100 fixed penalty - even if no tax is due or all the tax is paid on time
• after 3 months, daily penalties of £10 per day, up to a maximum of £900
• after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater
• after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.

This means that if you do not send in your 2011 tax return until 30 September 2012, you will have penalties to pay of £1,300 even if no tax is payable.

New penalties also apply for paying late. These are 5% of the tax unpaid at:

• 30 days
• 6 months, and
• 12 months

Interest is charged in addition to these penalties.

Further details can be found at www.hmrc.gov.uk/sa/deadlines-penalties.htm

My thanks go to Neville Daniels from Wrigley Partington for spotting the error in my last blog post.

The automatic penalties for sending in a late tax return, even though no tax is due, apply next year and not to tax returns for the year to 5 April 2010.

This means a late tax return for 2010 will not incur a penalty provided that all of the tax due for the year has been paid by 31 January 2011.

However, the Late Tax Return Penalties are to be increased for future returns.
The proposal is that increased penalties will apply to any late tax returns for the year to 5 April 2011. The last filing date for this return is 31 January 2012.

A late return will incur the following penalties:

• Returns sent in after 31 January – automatic penalty of £100 even if no tax is payable
• More than 3 months late – an additional daily penalty will be payable
• More than 6 months late – an additional penalty of £300 is due (or 5% of the tax due if this is higher)
• More than 12 months late – an additional penalty of £300 is due (or 5% of the tax due if this is higher)

I have recently brought up to date some outstanding tax returns for a new client. I prepared three outstanding returns that showed tax refunds. The refunds were repaid in full.

Under the new system of penalties, the client would have been liable to penalties of at least £2,100 (£700 per year plus a daily penalty) even though no tax was due.

Penalties for Late Paid Tax also increases.
If you pay your self-assessment tax late, the Revenue charges you interest but also charges a penalty on any tax that is currently outstanding as follows:

• Any tax due for the year to 5 April 2010 that is still outstanding at 28 February 2011 is subject to a late payment penalty of 5%
• Any tax due for the year to 5 April 2010 that is still outstanding at 31 July 2011 is subject to a further late payment penalty of 5%

For 2011 returns, the penalties increase to:

• Any tax due for the year to 5 April 2011 that is still outstanding at 28 February 2012 is subject to a late payment penalty of 5%
• Any tax due for the year to 5 April 2011 that is still outstanding at 31 July 2012 is subject to a further late payment penalty of 5%
• Any tax due for the year to 5 April 2011 that is still outstanding at 31 January 2013 is subject to a further late payment penalty of 5%

I believe the answer to avoiding any penalties is to keep your tax affairs fully up to date. My advice is to have your tax return prepared – or prepare it yourself – well before the deadline.

Do not put yourself and your adviser under pressure by supplying the information or completing the return in January. Why not aim to have the form completed by the end of the summer?

I know he is claiming everything he can but I should also state for the record in today’s world that he is claiming no more than he is entitled to! Apparently, though, it has been shown that up to 40% of the UK’s small and medium sized businesses have lost money as a result of inaccurate expenses claims from staff. Also many employers are unaware they can reclaim VAT on certain expenses and are therefore missing out.

I recently saw a great practical summary which covers a lot of really helpful information and guidance on this issue.

Select a link below to read the guide now:

• Expenses and benefits – an introduction
• Common mistakes employers make
• What are allowable expenses
• Typical benefits an employer could offer
• What receipts are needed and how long to keep them
• Skills your employees need to deal with expenses
• How to declare personal expenditure
• Reclaiming overpaid expenses

Feel free to contact me if you have further questions or leave a comment.

• a combination of an inspection power (the right to access and inspect business premises, business assets and business documents) 
• an information power (the power to require the production of information and documents).

This will enable HMRC for the first time to:

• access records before returns are filed (they can check records during an accounting year)
• turn up unannounced to check the records 
• routinely have access to business premises and assets and have the right to copy or remove documents
• the records and documents that HMRC will be able to access are very widely defined; and there is no right of appeal against an inspection

HMRC intends using these powers to inspect third parties’ premises and documents as a means of obtaining information about first parties.

HMRC may contact you to obtain details of transactions and correspondence you have with your suppliers and customers. It could also mean that the Revenue contact your customers and suppliers to find out details about you.

HMRC has published guidance on how they will implement the new legislation, which is as follows:

• to confirm that appropriate records are being kept
• to compare record systems with business activity, including premises and assets, to ensure those records fairly reflect the business
• to check current actions which are relevant to a tax avoidance scheme – this raises the possibility of live HMRC checks while planning is implemented with HMRC seeking access to documentation (books and records, board minutes, emails etc).

Later blogs will cover how to reduce the risk of an enquiry, the new penalties and how to survive an investigation if you are unlucky enough to be selected for further review.  

Please  contact me or your usual contact at Kirkpatrick & Hopes for further information.

This is a new page for my blog postings – for previous articles by me please click here.

• Pensions – The amount you can pay into a pension is based on earnings in the tax year and after the year has ended the allowance is lost. To use the allowance for 2008/09 the pension contribution needs to be paid by 5 April 2009.  If you pay into a pension through your company, the company will get tax relief on this at 21% in the year to 31 March 2009, but will get tax relief at 22% in the year to 31 March 2010.

• ISAs – Make use of your ISA allowance. This is £7,200 for 2008/09. Unused allowances will be lost if they are not used.

• Dividends - could you take a dividend from your company to make sure you maximise your income within the basic rate tax band?   If you have paid yourself a tax-free salary of £5,435 this tax year, then the maximum net cash dividend you can take is £31,800 free of personal income tax. (This assumes that you do not have any other personal income).

• Personal income – if you have income from investments consider splitting the investment with your spouse to maximise use of both your basic rate tax bands.

• Child Trust Fund – Parents and relatives of children born after 31 August 2002 can add up to £1,200 per tax year to the child’s Trust fund account.  Any income or gains are tax free.

• Inheritance tax – Consider making lifetime gifts to reduce your estate on death. There is also an annual exemption amount of £3,000 which can be given away each tax year.  If not used it can only be carried forward for one year before it is lost.

• Charity donations – If you are a higher rate tax payer you can get tax relief on donations to registered charities. To claim the relief for 2008/09 the gift must be made before 5 April 2009.  Make sure you have signed a gift aid declaration form provided by the charity.

Please call your usual contact at K&H if you need more information on any of these areas.

Quite correctly, he never fails to mention that penalties may be charged if you are late. But, he doesn’t tell you the full story.

Firstly, here are the rules for filing tax returns and the penalties for being late:

Returns must be filed online by 31 January
The balance of any tax due for 2007/08 must be paid by 31 January 2009. In addition a payment on account of tax for 2008/09 may be due by 31 January 2009
A maximum £100 penalty will be charged for late returns, however if the tax due is less than this the penalty is capped at the amount of tax outstanding
Further details are available on the Revenue website.

BUT, here are some ways that you can avoid having to pay fines:

1. Pay the tax due, or an estimate, before 31 January. Even if the tax return itself is late, there will be no fine if the tax is paid by the 31st.

2. Submit a tax return with estimated figures on it. You can resubmit at a later date with the right amounts and pay no fine.

3. Come up with a “reasonable excuse” for being late; eg something out of your control that has meant you could not get the tax return in on time, like your house (containing the relevant papers) burning down, or your computer hard disc failing. Whatever you say must of course be true!

4. Submit it by midnight on 1 February. The tax man is deluged with tax returns at this time of year, so they have a rule that any tax returns received by then are deemed to have been received on time.

If you would like to discuss any of the above, or to find out more, please contact Susan Kemish on 0118 9235811 or email susank@kandh.co.uk.