Ch 13 - Administration of tax Flashcards
(151 cards)
1
Q
What are the different penalties for errors?
A
If taxpayer took reasonable care in completing and took reasonable steps to disclose errors, no penalties
If using an agent (acc) to complete the return, taxpayer remains responsible for it being correct
Penalties are raised by assessment sent by HMRC, and are due within 30 days
2
Q
When do penalties become due?
A
30 days after HMRC assessment
3
Q
if an agent (acc) prepares an individuals tax return, whose responsibility is it to get it right/.
A
Still the individuals
4
Q
When are penalties suspended?
A
Suspended for up to 2 years to allow tax payers to put things right i.e. improve their acc records
5
Q
can tax payers appeal against tax penalties?
A
Yes
6
Q
When are penalties charged?
A
When the inaccuracies on the TR lead to
- Understated tax
- Excessive/false loss claim
- Excessive/false tax repayment
- Incorrect claims and reliefs
Or charged if taxpayer fails to advise HMRC of an incorrect ass w/in 30 days of the issue of the assessment
7
Q
What are penalties based on?
A
The Potential Lost Revenue (PLR)
Basically is the unpaid tax as a result of the error, can be up to 100% of the PLR
Max and min penalties are given in table ‘Penalties for Incorrect Returns
8
Q
What do penalties vary according to?
A
- Careless e.g. failing to check the return is consistent with underlying records
- Deliberate ut not concealed e.g. paying wages without operating PAYE/NIC, omitting large amounts of income from TR
- Deliberate and concealed e.g. creating false inv, destroying records
9
Q
Give examples of carelessness that leads to penalties?
A
Failing to check the return is consistent with underlying records
10
Q
Give examples of deliberate but not concealed that leads to penalties?
A
Paying wages without operating PAYE/NIC, omitting large amounts of income from TR
11
Q
Give examples of deliberate AND concealed that leads to penalties?
A
Creating false inv
Destroying records
12
Q
How can penalties be reduced?
A
Reduced where disclosure is made by the tax payer, with a greater reduction for unprompted disclosure
i.e. made at a time when there is no reason to suppose HMRC have discovered or are about to discover the error
Still get penalty if reasonable care was taken, but reduced to nil if rectified within 12 months through unprompted disclosure
Non-deliberate failure can be reduced to nil if taxpayer has a reasonable excuse
13
Q
How can penalties be collected for failure to notify? (Fully or partially)
A
Collected from an officer of a company (e.g. director) if ‘deliberate action’ is attributable to him/her
14
Q
What is a reasonable excuse?
A
A issue that prevents the taxpayer from meeting an obligation despite having taken reasonable care to comply
15
Q
Give some examples of reasonable excuses?
A
- Death of a close relative of tax payer shortly before the due date
- Tax payer being required to have an unexpected stay in hospital
- Tax payer having a serious life-threatening illness
- Delays relating to disability of taxpayer
- Computer or software failure while preparing online return
- Service issues with HMRC’s online services
- Fire, flood, theft or postal delays
Lack of funds to pay is not reasonable excuse
16
Q
Is lack of funds a reasonable excuse?
A
NO
17
Q
What does the amount of the penalty based on?
A
The PLR, which depends on the relevant tax
- Income tax / CGT, the PLR is the tax outstanding at 31 Jan following the tax yr
- Corp tax the PLR is the amount of tax unpaid 12 months after the end of acc period
- For VAT, the PLR is the amount of VAT for which the person is liable for the period from the date on which they should have been registered, up to the date when they notified HMRC of their liability to be registered, or HMRC otherwise became aware of their liability to register
18
Q
Where can you find max and min penalties for tax for failing to Notify?
A
In Penalties for Failure to Notify table
19
Q
TYU3: Stewart has never had to submit a TR
During July 18 he inherited a large sum of money which he invests in offshore high interest deposits.
Deposits produce income of £2.5k in TY 18/19 and he didn’t realise he should inform HMRC.
He finally informs them in June2020 when he receives a letter from HMRC asking about the inheritance.
Tax of £1k should’ve been paid on 18/19 income
Explain min and max penalty that could be charged on the failure to notify liability for this income?
A
Stewart should have notified HMRC of his new source of income by 5 Oct 2019
Actions weren’t deliberate so the max penalty is 30% of PLR: 30% x £1,000 = £300
He made a prompted disclosure within 12 months, so the minimum penalty is 10% of PLR: 10% x £1,000 = £100
20
Q
What taxes does the rules for keeping info apply to?
A
Apply to all taxes examined
But employers must keep specific records for PAYE
21
Q
How long must information be kept for corporation tax?
A
6 years from the end of the acc period
22
Q
How long must information be kept for income tax and CGT for business records?
A
5 years from 31 Jan following the tax year
23
Q
How long must information be kept for income tax and CGT for personal records?
A
1 year from 31 Jan following year
24
Q
How long must information be kept for VAT?
A
6 years
25
What is the general time limit for tax payers to make claims and what taxes does it apply to?
4 years from the end of the tax year or acc period
| Applies to all taxes
26
What is the general time limit for tax payers to make claims and what taxes does it apply to?
4 years from the end of the tax year or acc period
| Applies to all taxes
27
What is the maximum penalty for failing to keep records?
£3k max per tax year or acc period
| Can be reduced by HMRC
28
What is a SAO?
A senior accounting officer (SAO)
29
What is a designated senior accounting officer's responsibility?
Personally responsible for certifying each year that the company's acc systems can produce accurate tax information
30
What is the definition of a large company?
Has turnover in excess of £200m and/or gross assets of £2bn
31
What penalties can occur re/ SAO's and what would it be charged for?
£5,000 max for penalty for failure to provide an accurate annual certification or failure to establish an adequate accounting system
32
What taxes do the common penalty regime for late filing of tax returns apply to?
- Income tax: personal tax return, partnership tax return
| - CGT- personal tax return
33
What is the amount fo penalty for late filing of returns?
What does the penalty depend on?
Can be found in table 'Income tax and CGT: penalties for late filing of a SA return
Depends on the length of the delay of submitting
34
What does the penalty for late filings of return depend on
Length of delay in submitting the return
35
TYU4: Mark submitted his tax return for 2018/19 on 10 September 2020 which showed a tax liability of £4,000
Mark paid this amount on the same date
Explain the penalties that may apply in relation to the late filing of the return
As the return was not filed by the due date of 31 Jan 2020, the penalty of £100 will be charged
As the return was more than 3 months late, daily penalties of £10 per day could be enforced for a max of 90 days (£10 x 90 days = £900)
As the return was more than 6 months late, a penalty of 5% of the liability to tax will eb charged £4,000 * 5% = £200
Since this is less than £300, the minimum penalty will still apply
36
When must RTI be given?
Must be submitted on or before the day the employee is paid, using a Full Payment Submission (FPS)
37
What can employers opt do process using RTI?
Can opt to process benefits such as car, van, fuel, medical insurance and subs through their payroll
i.e. report value of benefit and
38
What can employers opt do process using RTI?
Can opt to process benefits such as car, van, fuel, medical insurance and subs through their payroll
i.e. report value of benefit and treat the cash equivalent of the benefit like a salary, so the relevant tax is deducted under PAYE
39
What are the forms used by HMRC to convey information?
P45 - 4 part form used when employee leaves.
P60
P11D
40
What is a P45?
4 part form used when an employee leaves
Contains summary of taxable pay, tax and NIC deducted, e'era NI contributions for the employee, up to the date of leaving
41
Does the P45 need to be submitted to HMRC/
No, under RTI no info on the P45 needs to be submitted to HMRC
42
What can penalties be given for relating to PAYE?
1. Incorrect PAYE returns (penalties for errors apply to incorrect FPS submissions under RTI)
2. Late filing of PAYE returns
43
What are the penalties for late FPS payments?
Found in table 'PAYE: penalties for late returns/submissions'
Depends on how many employees the PAYE scheme has
44
What does the penalties for late FPS returns/submissions depend on?
Depends on how many employees the PAYE scheme has
45
What is the penalty for PAYE/NIC late payments?
Given on PAYE/NIC due during the tax year (in-year PAYE)
Found in PAYE: penalties for late payments
Usually depends on number of defaults in any 12 month period (usually tax yr)
46
What does the penalty for late PAYE/NIC payments depend on?
Usually depends on number of defaults in any 12 month period (usually tax yr)
47
How can late payment penalties be suspended?
If taxpayer agrees a time to pay arrangement, unless this arrangement is then abused
48
TYU5: Lisbeth is an employer with a regular monthly liability of £10,000.
She pays that amount 9 days late on 6 occassions in the year.
Calc the total payable penalty for Lisbeth for the tax year
As there are 6 defaults in the year, the first is ignored, then the following 3 are charged at 1 % and the next 2 at 2%
Therefore the total penalty =
( 3 x 1% x £10,000) + (2 x 2% x £10,000) = £700
49
When is there no need for an individual to complete a tax return?
If all tax is paid under PAYE
50
What can employees with other income e.g. inv income of £3k or less choose to do?
Pay the additional tax via PAYe
51
When can individuals opt to pay additional other income e.g. investment income via PAYE?
When the other income is £3k or less
52
When are returns issued to individuals and how?
Done automatically to those who are likely to need them
53
When are short tax returns available?
For employees (who aren't directors), pensioners and traders with a turnover up to the VAT registration limit
54
What must be done if an indiv doesn't receive a tax return?
They must notify HMRC by 5 Oct following the end of the tax year (unless they have no need to complete a return)
Otherwise failure to notify can lead to a penalty
55
How are tax liabilities calculated when submitting electronically?
It is calculated automatically
56
How are tax liabilities calculated when submitting on paper?
Taxpayer must calc the tax, or request HMRC to calc the tax
57
What is the due date for submission of PAYE returns?
Depends on whether it is electronic or paper, and whether HMRC or taxpayer will cal the tax
58
What must partnerships submit by the same deadline?
Submit partnership income and gains by the same dates
59
Are short tax returns available electronically?
No
60
When can simple assessments be issued?
Simple assessments can be issued if HMRC have enough info without the tax payer submitting a return
Part of the movement towards digital accounts
61
TYU6 F, J & O run their acc firm as a partnership. During the tax year 18/19 the partnership made a large prof and several capital gains.
What is the due date for the following return:
a. The partnership was issued with a partnership tax return on 15 April 2019. Partners will submit a paper return
Partnership was issued with partnership tax return on 15 April 2019. So partners will submit paper return so filing date is the later of
- 31 Oct following the end of the tax year (31 Oct 2019)
- 3 months after the return was issued (15 Jan 2019)
i. e. 31 Oct 2019
62
TYU6 F, J & O run their acc firm as a partnership. During the tax year 18/19 the partnership made a large prof and several capital gains.
What is the due date for the following return:
b. F was issued with a full tax return for 18/19 on 27 May 2019. She wants to submit a paper return and for HMRC to calc her tax
Fran was issued full tax return on 27 May 2019
She wants to submit by paper so later of
- 31 Oct following end of TY (31 Oct 19)
- 2 months after the return was issued (27 July 19)
i.e. 31 Oct 2019
63
TYU6 F, J & O run their acc firm as a partnership. During the tax year 18/19 the partnership made a large prof and several capital gains.
What is the due date for the following return:
c. J was issued with a full TR for 18/19 on 3 Oct 2019. She wants to submit a paper return and calc the tax herself.
Later of
- 31 October 2019
- 3 months after the return was issued (3 January 2020)
i.e. 31 January 2020
64
TYU6 F, J & O run their acc firm as a partnership. During the tax year 18/19 the partnership made a large prof and several capital gains.
What is the due date for the following return:
d. O was issued with a full tax return for 18/19 on 23 Dec 19. She will submit her return electronically
Later of
- 31 January following the end of the tax year (31 Jan 2020)
- 3 months after the return was issued (23 March 2020)
i.e. 23 March 2020
65
What taxes are POA's never required on?
Capital gains tax
| Class 2 NIC
66
What are the due dates for POA?
1st payment = 31Jan in tax tear
| Second = 31 July following end of tax year
67
How are POA's calculated?
Based on 50% of prev tears tax payable by SA
| e.g. POA for ty 18/19 is based on tax payable for TY 17/18
68
How are POA's calculated?
Based on 50% of prev tears tax payable by SA
| e.g. POA for ty 18/19 is based on tax payable for TY 17/18
69
When are POA's not required?
When tax paid in prev year under SA were less than
£1,000
20% of total tax liability
70
When is a balancing payment for POA due?
31 Jan following end of TY
71
What is the balancing payment due for POA
Unpaid income tax
+ unpaid self-employed NICs
+ CGT
72
When will HMRC pay interest to tax payers?
Interest paid on overpayment of income tax and penalties
73
```
TYU7
Details of tax liability for 17/18 are as follows
Income tax liability = £19,400
Less PAYE (3,600)
equals £15,800
```
Class 4 NIC £700
Class 2 NIC £148
CGT £2,700
Calc the POA for 18/19 and state the due dates for payments
```
total income tax liability for 17/18 = £19,400
Less PAYE (3,600)
Income tax payable under SA 15,800
Class 4 NIC 700
Total = £16,500
```
Payments on acc
31 Jan 2019 = £16,500 * 0.5 = £8,250
31 July 2019 = £16,500 * 0.5 = £8,250
74
Is repayment interest a taxable benefit?
No, exempt income
75
When does late payment interest run from and to?
From the due date to the date the payment is made
| DOESN'T count the actual due date or the date of payment
76
TYU8 Tax liability for the year 18/19
Income tax liability = £19,360
Less PAYE (2.146)
equals £17,214
Class 2 NIC £153
Class 4 NIC £1,090
CGT £3,695
Total tax liability £22,152
Calc the balancing POA for 18/19, the first POA for 19/20 and state the due dates for payments
Balancing payment 18/19
```
Total tax liability £22,152
Less POA (2 * £8,250) (16,500)
```
Balancing payment due 31 Jan 2020 = 5,652
First POA for 19/20
2018/19 IT payable (after tax deducted at source) 17,214
Class 4 NIC 1,090
Relevant amount = £18,304
First POA due 31 January 2020 (£18,304 * 0.5) = £9,152
77
What are additional taxes due?
Taxes caused by amendments and discovery assessments
78
What can a penalty be charged for re their late payment?
Balancing payments under SA (but not POA)
Additional tax payments arising from amendments to SA
Tax payable under a discovery assessment
79
What do penalties on late payments depend on?
Depend on length of the delay
| Amount of unpaid tax
80
How can you avoid a penalty re corporation tax?
Must inform HMRC within 3 months of the start of its first chargeable acc period, stating when it begins
81
What do HMRC do once you have notified them of your firm chargeable accounting period re corporation tax?
Send notice to the company requiring the directors to complete a tax return
Usually issued shortly after the acc year end
82
When is the issue of a notice for companies directors to complete a tax return sent?
Shortly after the accounting year end of the company
83
If a notice for directors to submit a tax return isn't issued, what action must be taken?
What are the consequences if they don't?
Must notify HMRC within 12 months of the period end that it has taxable total profits
Or it will face a penalty
84
When must companies submit returns by online and when must they have paid their corporation tax?
Normally within 12 months after the acc period
Same for corporation tax
85
TYU9: Rodney was due to make the following payments for TY 18/19
Due date -
Payment -
Actual date of payment -
a. Identify the period for which interest will be charged
b. Calc the amount of interest payable, assuming 3% interest rate and working to the nearest dat. Assume that any penalties are paid on time
C. Calc any penalties due
a. Periods on which interest is charged
1 POA Period = 1 Feb 19 - 27 Feb 19
2nd POA = 1 Aug 19 - 30 Aug 19
Balancing payment 1 Feb 2020 - 29 April 2020
b. Interest payable
1 POA payment due = £2,100 interest due £2,100 * 3% * 27/265 = £5
2nd POA = £2,100 interest due £2,100 * 3% * 30.365 = £5
Balancing payment = £1,000 Interest due £1,000 * 3% * 88/365 = £7
c. Penalty
As the balancing payment is unpaid 30 days after the due date, the rate of penalty is 5%
£1,000 * 5% = £50
No further penalty due as tax was paid within 6 months of the due date
86
Can companies ask HMRC to calculate their tax?
NO
| As a part of the return process, the company must include a SA amount of corp tax payable
87
What else must be submitted along with corporation tax return?
Tax computations and accounts supporting the return
| Submitted in inline eXtensible Business Reporting Language
88
How must tax computations and accounts supporting a corporation tax be submitted online?
Submitted in inline eXtensible Business Reporting Language
89
How long does HMRC have the right to make amendments re obvious errors and mistakes?
within 9 months of the actual filing date
90
What are the obvious errors and amendments that HMRC may amend for re corporation tax
Arithmetical errors or errors of principle
91
What does a company have the right to do re their company tax return?
amend the return for any reason within 12 months of the due filing date
Make an 'overpayment relief' claim within 4 years of the end of the chargeable accounting period
92
When does interest run for overpayment of corporation tax from and to?
Runs from later of due date or date of actual payment
To the date of repayment
NOT counting the actual due date or the date of the payment
Taxable as non-trading loan relationship income
93
Is repayment interest taxable on corporation tax?
What about individuals?
Corp tax repayment interest is taxable under non-trading loan relationship income
Exempt
94
How is interest on late paid corporation tax charged?
Automatically
95
When does interest on late paid corporation tax run from and to?
Runs from the due date to the date of payment
| i.e. period between those dates, HMRC doesn't count the actual date due or the date of payment
96
Is interest on late paid corporation tax a deductible expense?
Yes as a non-trading loan relationship expense
97
What are the penalties for incorrect returns, failure to notify changeability and failure to keep records?
Dealt with under the common penalty regime
98
Where can you find the penalties for late filings of corporation tax?
Corporation tax: penalties for late filing of corp tax
99
What does the penalty for late filings of corporation tax depend on
Length of the delay and previous behaviour
Higher penalties are imposed if there has been a persistence failure to submit on time, meaning this is the third consecutive late return
100
When are penalties for late filings of corporation ax increased?
Higher penalties are imposed if there has been a persistence failure to submit on time, meaning this is the third consecutive late return
101
When do errors in VAT returns not incur a penalty?
If small errors disclosed in the next VAT return if they were not careless or deliberate
102
How are errors with VAT corrected?
They are aggregated so the net error is the total previous under declaration of VAT less the total previous over declaration
103
TYU10: Tivka Ltd has a corp tax liability of £92k for y.e 30 June 18. Company isn't large for corp tax purposes.
Tikva Ltd doesn't pay the amount due until 30 Sept 19
What is the interest payable by Tiikva Ltd? Assume an interest rate of 3% on late paid corp tax
Since the company isn't large, its corp tax is due 9 months and 1 day after the nd of the chargeable acc period
i.e. 1 April 209
It is paid on 30 Sept so interest will be charged between those dates
Interest payable = £92,000 * 3% * 181/365 = £1,369
104
What treatment is given to VAT errors that do not meet the definition of small errors?
Must be separately disclosed on a form VAT652
105
What is interest paid out on VAT overpayments?
Where there has been an error by HMRC the has led to the overpayment of output VAT or underclaim of input VAT
106
When does interest on VAT overpayments run?
Runs from the later of the date of payment to HMRC and the due date for the payment, to the date of repayment
107
When does interest on unpaid VAT run from and to?
Runs from the date it should've been paid to the date is is paid
Not counting date due or date repaid
108
TYU11: Wildman Ltd has 31 Dec y.e
Files the return for the y/e 31 Dec 18 on July 2020
Tax due of £80k is paid on the same day
Not a large company for corp tax purposes and all prev returns have been filed on time.
What is the penalty due as a result?
The return should have been filed on 31 Dec 2019, and was filed more than 3 months late so a fixed penalty of £200 applies
The return was filed on 18 July 2020 which is more than 6 months but less than 12 months late
Therefore, additional penalty of 10% of the unpaid tax is due (10% * £80,000) = £8,000
So the max penalty is £200 + £8,000 = £8,200
109
What is the penalties for incorrect VAT returns or failure to notify?
Same as for tax
110
When does a default occur?
When taxable person either files a VAT return late or makes VAT payment late.
Penalty known as default surcharge may arise
111
TYU12: Wolfgang discovers that he has made errors on his prev VAT return.
Overstated input tax by £3,780 and understated output tax by £2,500
Also forgotten to reclaim input tax of £225 on the purchase of a computer.
Calc the net VAT error
```
Output tax understated £2,500
Input tax overstated £3,780
Total £6,280
Less input tax under claimed £(225)
Net VAT error £6,055
```
112
What happens for each late return or payment during the 12 month surcharge period?
The surcharge payment is extended to end 12 moths after the end of the latest period of default
If the VAT has also been paid late, there is a surcharge based on the outstanding amount
Charge depends on the number of defaults in the surcharge period
Charges are given in table VAT: late payment or late filing- default surchase
113
When can HMRC make compliance checks?
Anytime on any tax return
114
TYU13: a. You are an ICAEW trainee working in acc firm.
Following client has been struggling with their VAT admin and your firm is now engaged to prepare their VAT returns.
During completing their return, you find the following error:
Explain whether the error can be corrected in the next VAT return or whether separate disclosure is required
Net error: £3,567
Turnover: £150,000
Small errors are defined as the higher of £10,000; and 1% of taxable turnover (subject to a limit of taxable turnover (subject to a limit of £50,000)
Errors that exceed this limit must be separately disclosed on form VAT652
Net error: £3,567
1% of turnover £1,500
Include in next return: Yes - less than £10k
115
TYU13: b. You are an ICAEW trainee working in acc firm.
Following client has been struggling with their VAT admin and your firm is now engaged to prepare their VATre turns.
During completing their return, you find the following error:
Explain whether the error can be corrected in the next VAT return or whether separate disclosure is required
Net error: £22,986
Turnover: £3,000,000
Small errors are defined as the higher of £10,000; and 1% of taxable turnover (subject to a limit of taxable turnover (subject to a limit of £50,000)
Errors that exceed this limit must be separately disclosed on form VAT652
Net error: £22,986
1% of turnover £30,000
Include in next return: Yes - less than £10k
116
TYU13: c. You are an ICAEW trainee working in acc firm.
Following client has been struggling with their VAT admin and your firm is now engaged to prepare their VATre turns.
During completing their return, you find the following error:
Explain whether the error can be corrected in the next VAT return or whether separate disclosure is required
Net error; £42,690
Turnover: £3,500,000
Small errors are defined as the higher of £10,000; and 1% of taxable turnover (subject to a limit of taxable turnover (subject to a limit of £50,000)
Errors that exceed this limit must be separately disclosed on form VAT652
Net error: £3,567
1% of turnover £1,500
Separate disclosure required as more than £35,000
117
What are determinations and when do HMRC make them?
Estimate of the tax due
| Given if the return is not received by the filing date, and they treat this as tax due under self assessment
118
When must the determination be made?
must be made within 3 years of the statutory filing date
119
When is a determination displaced?
Displaced by the actual self assessment
120
When is a determination displaced?
Displaced by the actual self assessment
121
TYU14: HMRC issue an assessment on 30 April 18 showing £4.1k VAT payable by Grab Ltd for QE 31 May 17.
Company pays the outstanding sum on 7 May 18
Calc interest on late paid VAT assuming the rate of interest is 3%
The underdeclared VAT should have been paid on 7 July 2017. Interest will be charged from 8 July 17 - 6 May 18
= £4,100 * 3% * (24 + 31 + 30 + 31 + 31 + 28 + 31 + 30 + 6 )/ 365 = £102
122
What are the time limits for raising a discovery assessment?
- 4 years if there has been no careless or deliberate behaviour
- 6 years for careless behaviour
- 20 years if due to deliberate behaviour
123
TYU15: Mei, FC of Hem Ltd discovered many numerical errors for QE 31 May 18. Result was that output VAT was £12,800 under declared. This exceeds small error limit.
Company voluntarily disclosed the amount to HMRC, paying VAT due on 7 Oct 18
a. Calc interest on late paid VAT assuming rate of interest is 3%
b. State min and max penalties for incorrect return for QE 31 May 18
a. The under declared VAT should have been paid on 7 July so interest will be charged from 8 July to 6 October
£12,800 * 3% * (24 + 31 + 30 + 6)/365 = £96
b. The Potential Lost Revenue is £12,800. The error is careless so the maximum penalty is £12,800 * 30% = £3,840
Hem Ltd made an unprompted disclosure so the minimum penalty is £12,800 * 0% = £0
124
When do the time limits for raising a discovery assessment run from?
End of acc period for corp tax
End of tax year for income tax and CGT
Prescribed accounting period for VAT
125
Which areas are appeals possible in re VAT?
Discovery assessments
| Amendments to self assessment as a result of compliance checks and VAT assessments
126
When must an appeal be done and how must it be communicated?
| What must is state?
In writing
Within 30 days
Must state grounds of the appeal
127
TYU16: The VAT return of Mole Ltd for QE 30 June was submitted on 9 August
Company's VAT return for the following quarter was submitted on 10 Nov
All previous returns were submitted on time
No returns have VAT outstanding
State the consequences for Mole Ltd
VAT return period for the quarter ended 30 June
The return was due on 7 August so it was filed late
This was the company's first default
Surcharge period begins, this will end on the following 30 June
VAT return period for the Q/E ended 30 September
The return was due on 7 November so it was filed late
This was the company's first default in the surcharge period
The surcharge period is extended and will now end on the following 30 Sept
128
TYU17:Livingstone Ltd has paid VAT due from its recent quarterly returns as follows:
Vat QE 30 June
VAT due 14,500
Date paid 16 Aug
VAT QE 30 Sept
VAT due £26,200
VAT paid 19 Nov
all prev payments were paid on time
What surcharges will be payable for late payments on VAT?
VAT return period for the QE 30 June
- The return was due on 7 Aug so it was filed late
- Company's first default
- A surcharge period begins, this will end on the following 30 June
- No default surcharge as this was the first default
VAT return period for the QE 30 September
- Return was due 7 November, so was filed late
- First default in surcharge period
- Surcharge period is extended and will now end on the following 30 Sept
- First default in surcharge period, penalty of 2% * £26,200 = £524 will be charged
129
How are most appeals settled?
Most are settled by agreement but if not settled will be heard by the Tax Chamber of the First-tier Tribunal
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When is an information notice given?
If a taxpayer does not fully cooperate with informal requests for information, HMRC can use its statutory powers to issue information notices
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What are the 4 types of information notice?
Tax payers notice
Third party notices
Data-holder notices
Unknown-identify notices
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What is a taxpayer notice?
Notice to request info and documents reasonably required for checking the taxpayers tax position
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What are the exemptions to third party notices?
Tax advisors and auditors do not have to provide info connected with their functions, such as working papers
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Give examples of who may be requested for data-holder notices
Banks
| Employers
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What are unknown-identify notices
Requires any person to provide the tax payers name, address and date of birth
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Must people always respond to information notices?
No, they usually have the right to appeal against a notice
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When can HMRC enter a taxpayer's business premises and inspect assets and documents held?
If this is reasonably required for checking their tax position
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Is there any appeal against the inspection notice?
No
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What inspection powers to HMRC have?
can HMRC enter a taxpayer's business premises and inspect assets and documents held if this is reasonably required for checking their tax position
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What action can HMRC take if there is dishonest conduct by tax agents
Has powers it can use if there is evidence that tax agent has acted dishonestly that has lead to a loss of tax
Powers include
- Issuing a conduct notice
- Issuing a file access note to obtain the working papers of the tax agent
- Publishing information about the tax agent
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What is the minimum and maximum penalty for a tax agent?
Minimum of £5,000
Maximum of £50,000
Depends on the tax agent behaviour
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What is a tax agent?
Is an individual who assists clients with their tax affairs
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What penalty can be imposed if a tax agent refuses to comply with access notice?
£300
| Plus additional daily penalties of £60
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Can a tax agent appeal against penalties for refusing to comply with access notes?
can appeal but not against a file access note
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What is direct recovery of tax debts from bank accounts?
HMRC can collect taxed owed by a tax payer directly from their bank account if the following conditions are met
- HMRC must issue notices to the bank to prevent the taxpayer from withdrawing the amount due, and then require the bank o pay the amount to HMRC
- Amount due must be at least £1k
- There is a period before the debt recovery during which the taxpayer can object
- Taxpayer must be left with at least £5k in their accounts
- HMRC must be satisfied that the taxpayer is aware of the sum that is due
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What help can be given to taxpayers?
To help them manage their cash flow, budget payment plan can be set up to make monthly or weekly DD payments towards future SA liabilities
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What are the conditions for a taxpayer wishing to set yp a budget payment plan?
Must be up to date with previous tax payments
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what is the flexibility surrounding the budget payment plans offered to taxpayers?
Taxpayer can choose the amount of regular payments
Can suspend the collection period for a period of up to 6 months
If the total paid in advance of the normal due dates doesn't cover the tax payable, the taxpayer must pay the difference by the normal due dates
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What is the BPSS?
HMRC's Business Payment Support Service
| It is in place to assist businesses and individuals unable to pay amount owed to HMRC by the due date
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When is BPSS offered?
Provided the taxpayer contacts BPSS before any tax is overdue, then HMRC will review the circumstances and may offer payment by instalments
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Are late payment interest amounts applied to payments of BPSS?
If the interest is due, when does it run from and til?
Late payment penalties won't be charged on payments included in the arrangement of BPSS, as long as tax payer makes payments in accordance with the arrangement
If interest is due, runs from normal due date until payment is made
