Taxpayers Deadline Looms

24 July 2008

The nine million taxpayers who come under the self-assessment regime face an important deadline next week.

By July 31 they should have made their second ‘payment on account’ for the 2007-08 tax year. If they fail to meet the deadline they face having to pay interest at 7.5 per cent per annum on the outstanding sum.

Any individual who has not yet completed a tax return for the previous 2006-07 financial year - something which should have been done by January 31 2008 - has until July 31 to do so, or be hit with a further £100 fine on top of the one for missing the original January deadline. One positive point is that the fine is limited to the amount of tax outstanding. In other words you cannot be fined more than £50 if you owe only £50 of tax.

Further penalties await those who have not yet settled their tax bill for 2006-2007. They will have to pay interest on the tax due, plus a 5 per cent surcharge on the outstanding amount.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, says: “The tax system is driven by fines, with taxpayers readily penalised for late payment.”

Sheena Hay, a senior tax manager at Grant Thornton, the accountant, says: “Tax returns and payments on account are often the last thing on people’s minds, but it’s best to stick to the Revenue’s self-assessment deadlines or you’ll be faced with penalties.”

Next year’s late payers could face even more draconian penalties if the Revenue gets its way. In a consultation document published last month the Revenue is seeking powers to impose daily fines of up to £60 a time on late payers without having to seek the prior permission of the General or Special Commissioners, as it currently has to.

The Revenue is also proposing penalties for late payment in extreme cases of up to 100 per cent of the tax owed, as opposed to the current maximum penalty, which is two surcharges of 5 per cent of the tax owed.

Mike Warburton, senior tax partner at Grant Thornton, says: “My concern about these proposals is that they put too much power in the hands of tax inspectors. At the moment the position is that the Revenue will not apply penalties where taxpayers have acted reasonably, but the test of reasonableness is what the courts decide. Under the proposed new rules the initial presumption will be that what is reasonable is what the tax inspector decides.”

Meanwhile those in receipt of tax credits have until July 31 to renew their claim to these benefits - or face the possibility of losing them.

You should check the information in your renewals pack and alert the Revenue if your circumstances, such as pay or working hours, have changed. All claimants will receive an annual review form and most will also receive the annual declaration form, which must be completed either on paper or by phone.

If you need assistance you can call the tax credits helpline on 0845 300 3900. It will help to have all the information you need to hand, such as payslips, the end of year P60 form and details of your childcare arrangements.

The Self-Assessment helpline is 0845 900 0444.

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