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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Some freelancers may find it beneficial to consult a contractor accountant over the next few days in order to make sure their tax return is in order.

For the 25% of self-assessed taxpayers who still complete paper tax returns, the filing deadline grows ever nearer. Anyone whose return arrives after midnight on 31st October could be subject to a £100 penalty, the Revenue has warned.

There are around 9 million self-assessed taxpayers in the UK and 75% of them file online at the end of January. HMRC prefers this method of submission because it reduces the man hours spent trawling through thousands of pieces of paper.

Online filing has benefits for the taxpayer as well. Your tax is calculated automatically; you receive an acknowledgement when you’ve submitted your return; and it’s processed faster, meaning that if you’ve made an overpayment of tax, you’ll be repaid more quickly.

The taxman said there is still time to make the transition from paper to online filing by going to HMRC’s website and select “Register (new users)”.

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Contractor accountants and small businesses could benefit from a new invoicing directive from the Council of the European Union.

The new system, which will simplify VAT invoicing processes, must be in place by 2013. At that time, tax authorities must accept and handle electronic invoices in the same way as the current paper documentation.

Electronic invoicing experts at Deloitte welcomed the announcement saying that computerised financial systems already store invoice documentation securely and so it makes sense to acknowledge the new technology is secure when it comes to tax audits. However, they would prefer to see the directive implemented before 2013 if possible.

The UK and the Netherlands already have a system whereby companies can make arrangements to make sure all the necessary procedures have been followed in order to produce a correct tax return.

The directive also contains anti-fraud measures and deadlines for the issuance of invoices which are aimed at speeding up the exchange of data on intra-EU supplies of goods and services.

The European Union will also need to provide new standardised instructions regarding the archiving of accounting documents. Currently, UK companies and limited company contractors must retain e-documents for at least 6 years but other member states have different retention requirements.

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A last minute rush resulted in a record number of individuals using HMRC’s website to submit their self assessment tax returns in 2010.

Figures from HMRC showed that 6,429,899 people, including many contractor accountants, used the online facility in advance of the January 31st deadline. This is a 12% increase on last year and accounts for 75% of all returns.

The data further showed that staggering 384,638 people waited until the last 24 hours before submitting their tax return, with the busiest period between 4pm – 5pm on 29th January. Anyone who missed the deadline faces a £100 fine.

The downside of the online system is that a number of taxpayers have been targeted by ‘phishing’ crooks. The government has issued a warning for taxpayers not to respond to e-mails offering tax rebates.

According to HMRC, a number of people, including contractors, have been sent e-mails saying they are entitled to a tax refund and must complete an online form with their personal details, in order to obtain the funds.

The government has warned that anyone who responds to such correspondence faces having their bank accounts and credit cards “emptied”.

“We only ever contact customers who are due a refund in writing by post,” an HMRC statement explained.

Taxpayers were also told that the department “never uses emails, telephone calls or external companies in these circumstances” and were “strongly urged” to forward any suspect e-mails to HMRC to investigate.

We would also like to take this opportunity to stress to all our readers the importance of ignoring all emails that ask you to divulge personal information such as bank account details.

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