Self Assessment Tax Returns
Any person who is required to make a Return is obliged to keep tax records. The maintenance of the records is vital together with the accuracy and the need for them to be comprehensive.Where a person is involved in a trade, profession or business, all records must be kept safe for five years and 10 months after the end of each tax year. For other individuals the retention time is twenty-two months after the end of each tax year. Other authorities may require your business records to be kept longer e.g. Customs & Excise.
Remember that the Inland Revenue has the power to call for all the papers and documents if a Return is selected for review or investigation.
Basis of Assessment
Self-Assessment brings a major alteration to the basis on which an individual and partnerships are assessed. Previously, profits from a set of Accounts were assessed in the tax year following the year in which they fell. In effect tax on these accounts was often paid eighteen months after it had been earned.This was known as a "previous year" basis of assessment. This has now been changed to a "current year" basis of assessment as of 1997/98. Therefore profits will be assessed in the tax year that they fall.
Tax Returns
The format of a Tax Return has changed dramatically.The new form requires more in depth-information about your business and in particular the income generated and expenditure incurred. Taxpayers have set time limits in which to submit a fully completed return and failure to do so will mean that an automatic penalty will be levied. The term "fully complete" means that entries such as "to follow" are not acceptable.
Time Limits & Due Dates
Payment of Tax
Tax on all sources of income and gains is payable on the same date, saving many individuals from having several different tax assessments for the same year and possibly from different tax districts.The normal due date for tax is 31st January following the tax year. Although many people will be required to make interim payments on 31st January in the tax year and 31st July following. The interim payments will generally be 50% of the tax assessed for the previous year.
Tax Returns
The normal filing date for a Return is 31st January where you (or your agent) calculate your tax liability although forms issued after 31st October will be required to be submitted within three months.If it is desired that the Revenue calculate the tax due the form needs to be submitted by 30th September.
Penalties
- Interest will be charged on all tax paid late
- A 5% surcharge will be levied on sums more than 28 days late
- A further 5% surcharge will apply if sums are outstanding after 31st July
- There is a tax geared penalty for incorrect Returns and Accounts claims
- Record keeping - penalties for failure to keep and retain complete tax records
- Late Tax Returns - fixed and daily penalties sometimes tax geared
Warning in some cases the penalties can be £3,000!
