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Tax update week ended 24 September 2010

25th September 2010

5 October deadline

If you’ve never filled in a tax return but have received some form of untaxed income or gain – e.g. selling a rental property, you have until 6 months before the tax payment deadline. The most recent completed tax year is the year ended 5 April 2010. Therefore, if you have something to report (relating to that year), you must report it before 5 October 2010.

Neglecting to notify has the following potential consequence: 100% of the potential tax is levied as a penalty! If the tax is paid by 31 January 2011 this penalty may be cleared.

Doing so in the form of a letter may not be useful as HMRC will probably return form SA1. Better to simply send the local office form SA1 in the first place – although HMRC have advised that the processing office may take up to 8 weeks to process. The office (CAAT) then sends a notice to deliver a tax return and the all-important “UTR”.

Self employed people (sole traders) fill in a CWF1 form instead and may do so online.

An unsolicited return is where you have not gone through the above processes and simply submit a tax return without a UTR. HMRC may reject this and levy the penalties mentioned above. Also note that completing an R40 repayment form does not constitute notification of a tax liability.

Penalty re failure to notify

SA1 (not including self-employed)

CWF1 (self-employed)

Self-employed online registration

Tax returns (unsolicited)

Trust gains and estate gains

On 23 June 2010 the Capital Gains rate (CGT) rose from 18% to 28%. This occurred in the tax year 10/11 (tax deadline 31 January 2012) so most people aren’t overly worried about this yet. However, tax returns for trusts (by trustees) or estates (personal representatives) may be due before this.

They must pay 18% on gains made pre 23 June 2010 and 28% thereafter. If qualifying, and a joint election made between trustee and beneficiary, entrepreneurs relief (effective 10% tax rate) may apply.


Guidance for SA905 (2010/11)

Freqently asked questions re CGT changes 2010/11

PAYE computations and remittance

The Employer CD-rom is has proved troublesome. If using it, ensure you make the September updates from the HMRC website.

After 5 April 2011 you must download PAYE tools from the HMRC website or use commercial software.

Crucially, when making a direct debit payment, you must use the correct year’s tax reference (13-digit). The HMRC software will not just allocate payments to correct periods using logic. We have experienced difficulties – unfortunately, to avoid penalties and demands you not only have to pay the correct amount but also have the correct reference.

Finally, ensure you make the remittance in good time. Allow a few days’ for bank transfers..

Updates for PAYE CD

Common difficulties re PAYE direct debit payments

Ineffectiveness of faster (same-day) payment for PAYE payments

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“This information is taken from Mark Lee’s weekly practical tax newsletter, published by the Tax Advice Network”