HMRC has issued a reminder to everybody, including contractor accountants, who have still to file their tax return for 2010-11 that daily penalties will start accruing if it is not returned before the first of May.

Once a self-assessment returns becomes more than three months late, a daily penalty of £10 is added for every day it stays outstanding and that is in addition to the automatic £100 fine for missing the filing deadline. The £10 penalty is applied for a maximum of 90 days and could result in late filers accumulating a total of £1,000 in penalties if the Revenue has still not received their return by the end of July.

The penalties don’t stop there though. Returns that are 6 months late will incur a further penalty of 5% of the tax owing, or £300, whichever is more. Returns that are still unfiled after 12 months will be subject to that penalty for a second time.

It’s not enough just to file your return on time; you must also settle up your outstanding tax liabilities. If a payment is 30 days late, a penalty of 5% of the tax due will be levied, followed by further penalties if the account has not been settled after 6 months and 12 months.

Stephen Banyard from HMRC explained that the department wanted returns, not penalties so anybody who has not yet filed their return should it before the 30th April or contact the Revenue if they think filing does not apply to them.

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Accountants will be aware that HMRC has launched a number of campaigns in which they target specific sectors over recent months.

Its latest campaign is aimed at people who trade over the Internet but don’t declare their activities on their tax return. They now have the opportunity to tell the Revenue about the income they have received from online sales and pay any tax due.

Called the e-Markets Disclosure Facility, this time limited scheme allows online traders to settle their outstanding tax liabilities in return for lower than usual penalties. Those who ignore the opportunity could face penalties of as much as 100% of the tax owed if HMRC has to seek them out.

The campaign is targeting people who are using the Internet to buy and sell goods as a business. If you occasionally sell something on eBay, you will not normally be expected to pay tax on the money you receive and therefore you do not need to make a disclosure.

However, online traders have until the 14th of September to come clean and tell HMRC about their activities and arrange to pay the tax they owe in full, including interest and penalty charges. If a full disclosure is made prior to the deadline, the maximum penalty in the majority of cases will be 10% of the tax owed.

Any traders who are suspected of not owning up will be investigated and the Revenue has hired additional investigators to pursue them. In addition to a possible 100% penalty, guilty parties may also be subject to a criminal investigation.

Online traders who need advice on complying with the disclosure opportunity may want to ask the help of a contractor accountant.

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Contractor accountants may be concerned to learn that George Osborne is considering changing tax relief on pension contributions when he delivers the March Budget.

He has various options available to him. If he cut the relief on all contributions to 20%, taxpayers who pay the higher 40% rate would lose £20 for each £100 they invested and those paying the 50% top rate would lose £30 per £100 invested. On top of that, pensions are subject to tax so a taxpayer might have to pay tax at 40% or even 50% on their pension when they retire.

If this happened, a lot of people in defined benefit schemes might have to file a tax return because the pension benefits could not be determined as easily as they can with a defined contribution scheme.

PwC’s head of pensions, Raj Mody, explained that if tax relief on pensions was reduced, those people who pay a higher rate of tax could be better off if they received cash and paid income tax on it at the time.

The Chancellor is also considering reducing the annual allowance of £50,000. PwC says this would be easier to implement and people would still have an incentive to invest money in a pension fund.

Another option would be to reduce the tax-free lump sum people are entitled to on retirement. Those approaching retirement would then pay more tax than they expected on their pension pot.

Mody did warn that there have already been various changes to pensions in recent years and the public may lose trust completely if the Government implements further amendments.

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Contractor accountants who missed the deadline for filing their self-assessment tax return are likely to receive a penalty notice from HMRC in the next few days.

HMRC said it would start sending out penalty notices on the 17^th of February to inform late filers that they need to pay an automatic penalty of £100. The Revenue has implemented a new penalty structure this year that could lead to fines of up to £1,600 for people who persistently refuse to file.

However, the ICAEW has been informed that HMRC will cancel tax returns and remove penalties from taxpayers who should not be included in the self-assessment system. Taxpayers who think they are not liable to file self-assessment should call the HMRC helpline and answer a few questions to establish their tax status.

The new penalty system has been widely publicised and there is really no excuse for missing this year’s deadline, especially as it was extended by 2 days due to industrial action at Revenue call centres. For the first time, HMRC said people would face the £100 penalty even if they had no tax to pay. It appears that the government has now had a change of heart and is prepared to remove those individuals from its penalty system.

Earlier this month the Revenue announced it was to clamp down on people who failed to file, especially those who should pay higher rate tax. It is therefore vital that anyone who believes they should not be included in self-assessment contacts HMRC and gets their name removed as soon as possible.

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Today really is the last day that you can file their self-assessment returns without receiving a late filing penalty from HMRC.

Normally, returns should be filed by midnight on January 31^st, but this year the Revenue extended the deadline to February 2^nd because members of the Public and Commercial Services Union were taking industrial action on the 31^st and members of the public would struggle to get through to HMRC call centres.

The Union hailed the strike as a success, saying 14,500 members of staff did not report for work. Volunteers staffed revenue enquiry centres and there were huge backlogs at call centres.

At first glance it seems a sensible move for HMRC to extend the filing deadline. It gave a bit of extra time to the estimated 90,000 individuals who were expected to phone asking for help with their tax returns on Tuesday. And these people would have swamped the Revenue will letters of complaint if they had been unable to do and as a result, received an automatic fine.

However, the extension will not help those people who had not already applied for the unique reference number they needed to enable them to complete their return online. This is sent out by mail and can take up to 7 days from date of application to arrive.

HMRC has been having major problems with their admin system over recent months. It takes weeks, sometimes months for people to get a written response to their queries, so a further deluge of mail would have swamped an already hard-pressed department.

The extension will probably will be seen as a compromise that should suit everybody. The extension has been widely publicised so there is really no excuse for filing late. Taxpayers have been given an extra couple of days to file, but the Revenue will no doubt still rake in the fines from people who had not received their URN and those who purposely ignore their filing requirements.

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Accountants for contractors may want to remind their clients that the deadline for filing self-assessment income tax returns is fast approaching.

Last week, HMRC said it had received 1.8 million paper returns by the 31^st October and a further 4.5 million online self-assessment returns. However, that left around 3 million people who still need to submit or receive an automatic £100 penalty for missing the deadline.

Even if there is no tax owing, HMRC must receive a return from the taxpayer by the 31^st of January. In addition to the automatic late filing penalty, further charges will be levied the longer the process is delayed.

An HMRC spokesman recently said that about 10% of taxpayers miss the filing deadline. This could generate £10 million for the Revenue from late filing fines alone. Add to that a potential £1,600 from each taxpayer who delays filing for 12 months and the Treasury coffers would swell significantly.

Taxpayers who are having problems filing their returns may want to contact an accountant for help after Revenue staff announced they would be holding regular 30-minute walkouts.

Members of the PCS union believe HMRC is trying to privatise jobs by bringing in two private sector firms to man call centres. The Revenue disputes the claim, saying the move is designed to improve working processes.

An HMRC spokesman said the department was trying to find ways to improve the service it provides to customers, but PCS general secretary Mark Serwotka says it was wrong to outsource work when so many civil servants were losing their jobs.

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HMRC has already decided that its New Years resolution is to get tough on people who don’t submit their returns on time.

Contractor accountants have little over a month left to file their self-assessment tax return and pay any monies owed to the Revenue. Failure to do so will result in an immediate penalty of £100, even if your tax liability for the year ended 5^th April 2011 is zero.

The only exception to this rule is if your Notice to Complete a Tax Return notification from HMRC arrived after 31^st October 2011. If that was the case, your filing deadline is three months after receipt of that letter.

In addition to the £100 fixed penalty for late submission, HMRC has introduced a new set of fines to encourage people to file sooner rather than later. If your tax return remains unfiled 90 days after the January deadline, you will be charged £10 for each late day in addition to the £100 fixed penalty. This could add another £900 to your overall tax bill. Additional penalties are levied if the return remains outstanding after six months and 12 months.

Penalties can be cancelled if the Revenue agrees you had a reasonable excuse for late filing. Unfortunately there is no clear definition of what a reasonable excuse is, but the department has provided examples of situations it would accept, such as the taxpayer suffering a life threatening illness, problems with its online filing service or being unable to replace documents lost in fire or flood in time.

Rather than run the risk of accumulated penalties, it would probably be better to file and pay in plenty of time, and the long festive break could be the perfect opportunity!

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Contractor accountants will have a busy month in January filing online self assessment returns for their clients.

As the January 31^st deadline looms, it savvy accountants will already have drawn up a plan for dealing with the additional workload. However, if you have not already done so, the festive break would be a good time to start planning.

The first thing to do is ensure you know exactly what you’re up against. How many clients require you to complete their tax returns for them? Do you have all the details you need to proceed?

Are your clients fully up to date with any legislative changes and if not, should you provide them with training? On a similar subject, you must ensure your accounting software is updated to reflect statutory requirements, and if it isn’t install and test any updates sooner rather than later.

Effective communication with clients is vital at this time of year. Think about the problems you encountered during last year’s filing season and work together with your clients to find solutions. Also make sure your clients fully understand what information they need to provide you with, and when you need to receive it.

No matter how meticulous you are with your planning, problems will occur, but the trick is to spot them before they turn into a crisis. Make sure you review your progress on a regular basis and deal with any issues as soon as they arise.

Of course, once you’ve done all the hard work, you’ll be looking forward to receiving payment. Make sure all your clients know your payment terms before you start working on their return and send out your invoice as soon as possible after the work is completed. That way you should minimise the danger of late payment.

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Two years ago, HMRC set up the High Net Worth Unit to look into the personal tax affairs of the UK’s wealthiest citizens; a move which appears to have paid dividends.

Since the unit was set up, it has recovered a total of £247 million; £85 million in 2009/11 and £162 million last year. Initial projections were that the unit would yield between £50 million and £100 million every year so it is already exceeding expectations.

David Gauke, the Exchequer Secretary to the Treasury, explained that everybody must pay their fair share of tax, and by working in conjunction with tax agents and online accountants, the Revenue’s HNWU team has been able to make sure the complicated tax affairs of the rich are dealt with accurately.

Meanwhile, HMRC has been criticised for its tactics over the issuance of penalty notices to employers who are late submitting tax returns.

In a recent tax tribunal case it was revealed that the Revenue did not issue a penalty notice until the taxpayer had already amassed fines worth £400. If the penalty notice had been issued in the first month, the fine would only have been £100.

Some employers genuinely forget to submit their return and higher penalties are disproportionate when an early reminder could be enough to inform them of their mistake, said Rob Durrant-Walker from the York Office of UHY Hacker Young.

He went on to say that HMRC should be concentrating on making sure everybody pays the correct amount of tax and helping them to do so rather than adding on extra charges.

The Revenue is also implementing a new penalty regime for self-assessment taxpayers who file their returns late. In an important change to the previous rules, failure to submit a tax return will result in an automatic £100 fine, even if the taxpayer does not owe any money.

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HMRC members of the PCS union took part in industrial action earlier this month and now plan to walkout on the 30th June in protest over job cuts, changes to public sector pensions and the government’s pay freeze.

The 7th/8th June protest involved finishing work at 4pm, starting work late the following day and taking a 2 hour lunch break. However, this action was not properly organised in some areas of the country and rather than participate in protests, a lot of people simply went home after the 4pm walkout.

There are various issues that are causing discontent amongst Revenue staff at present. One such issue is the new attendance management policy which has reduced the amount of sickness leave an employee is allowed before line managers can consider formal action. Under the new regime, formal action could technically be taken if an employee had four days sickness leave. HMRC currently has the highest rate of sickness absence out of all 103 civil service departments.

At the most recent ballot, 60% of PCS members voted for a strike at the end of June, although the turnout was only 32%. Teachers and members of other unions will also be joining the strike, which is likely to disrupt customer services at HMRC.

The PCS has also warned of the possibility of further strikes this autumn if an agreement cannot be reached with the government. This could cause concern for accountants and taxpayers who file their self-assessment tax returns on paper, as the filing deadline is 31st October.

The Union has also asked accountants to back their strike action but it is unlikely that this call will garner much support.

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A recent survey by Inuit shows that 69% of small businesses are put off recruiting new staff because of the burden of PAYE.

The software provider discovered that nearly 50% of employers did not realise that their end of year returns had to be filed by the 19th of May and 28% said they did not expect to meet the deadline.

Mark Linton, the founder of The Business Growth Show, said one of the major challenges facing small business owners is not the actual process of recruiting new staff, but what to do once they’re onboard.

PAYE for small businesses is a nightmare. “How do I pay staff?”, “Is government legislation getting in the way?” And “am I doing it right?” are all questions that worry small business owners, he explained.

In previous years, there was a seven-day grace period for people who missed the deadline but now that year-end returns have to be filed online, this has been removed. Employers who did not submit on time face a penalty charge of £100 per 50 employees for every month, or part month, that the return is overdue.

SMEs are also worried about the compliance checks HMRC is about to implement. Penalties of up to £3,000 could be imposed on businesses that have not kept accurate employee records.

Meanwhile, another survey, this time from the Clydesdale and Yorkshire banking group, has found that 10% of small business owners have been late making VAT payments and 19% have missed out on grants or tax breaks.

Whilst 15% of small business owners are bamboozled by new regulations, 16% said they did not know who to turn to for advice on business legislation. Gary Lumby from the banks said it was a matter of concern that SMEs did not know how to get help and the banks hope to remedy that situation for their clients.

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Contractor accountants may see a surge in enquiries after HMRC announced a new tax amnesty on Tuesday.

The agreement encourages plumbers or those in associated trades, such as heating engineers and gas fitters, to settle their past five year’s undisclosed tax in return for a 10% penalty. Experts however are confused as to who exactly it applies to saying it has very similar to the terms offered to anybody wanting to make full disclosures.

A tax investigation partner at PKF, John Cassidy, pointed out that specific tax amnesties have been offered in the past but the wording of this one seems to cover a broad spectrum. This seems close to offering a back door general amnesty, he added.

HMRC hit back saying the Plumber Tax Safe Plan is specific and the forms are designed so that only plumbers and associated tradesmen can complete them.

The Revenue wants to encourage other people to make disclosures and they will receive preferential treatment for doing so but HMRC does not guarantee that they will receive the 10% penalty rate promised to plumbers.

Plumbers wanting to take advantage of this amnesty have until the 31st May to register intent and then settle their outstanding liability by August 31st.

Chas Roy-Chowdhury from the ACCA believes this time frame is not generous enough. Plumbers may only see their accountant once a year, he pointed out. The professional tax and accountant bodies had asked for the deadline to be extended until the 31st January 2012. For tradesmen who see their accountant once a year, this would seem sensible as it coincides with the self-assessment deadline.

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