Taxation F6 Flashcards
Unless the taxpayer has a reasonable excuse, penalties will automatically apply if ?
-a self-assessment tax return (personal or corporate) is submitted late; or
-records are not kept by the taxpayer for the appropriate time; or
-the taxpayer fails to notify HMRC of a new source of income or profit within the appropriate time interval.
What are the Penalties for submission of a corporation tax return after the filing date (generally the anniversary of the end of the accounting period)?
- Up to three months-£100
- More than three months but less than six months-£200
- More than six months but less than 12 months-£200 + 10% of any unpaid tax for the relevant accounting period
- 12 months or more £200 + 20% of any unpaid tax for the relevant accounting period
5.The £100 and £200 amounts are raised to respectively £500 and £1,000 if the late filing is the third or subsequent consecutive occasion of late filing
How much is the penalty for Failure to retain records supporting tax returns and liabilities for the appropriate period attracts ?
a maximum penalty of £3,000
What are the 4 payment of tax due(rule) corporation tax ?
Estimated tax is payable 9 mths and 1 day after the end of each acc. period provisions - quarterly instalment payments for ‘large’ companies. electronic payments.
(b) Interest due on tax paid late starts from the due date to the date of payment at 6.5% p.a
(c) Interest on overpayments of tax start from the later of the due date or the date tax was paid at 3% p.a
(d) Under self assessment interest on tax paid late will be deductible against interest receivable.
Interest received on overpaid corporation tax will be taxable as Interest receivable
When must a new company notify HMRC and what is the penalty of not doing this?
- A company filing Corp. Tax for the 1st time must notify HMRC when the 1st acc. period starts, within 3mths of the start f the acc. period.
- Failure to notify chargeability to tax within 12 mths of the end of the acc. period will lead
penalty based on a percentage of the tax unpaid 12 mths after the end of the acc. period.
What constitutes a quarterly installments of tax payment ?
Quarterly instalments apply to large companies, in respect of its corporation tax liability if augmented profits exceed a profit threshold of £1,500,000.
Quarterly Instalments 6 rules ?
(a) large companies.
(b) If a company in respect of its corporation tax liability if augmented profits exceed a profit threshold of £1,500,000.
(c) From 1 April 2023, the profit threshold is instead divided by the no. of associated
companies as at the end of the immediately preceding acc. period.
(d) The instalments are based on the estimated current year’s liability.
(e) The four quarterly instalments will be made in months 7, 10, 13 and 16 following the start of the
acc. period. The instalments are due on the 14th of the month. (eg: yr ended 31 March 2024 the first quarter payment would be due October 14,2023 followed by further payments due January 14, April 14 and July 14, 2024)
(f) Quarterly payments are not required if:
‣ current profits do not exceed £10 million and
‣ the company was not large in previous AP.
what are the 3 Claims rule (Corp. Tax)
(a) Wherever possible claims must be made on a tax return or on an amendment to it and must be
quantified at the time the return is made.
(b) If an error in a return or mistake is made claim may be made
within four years from the end of the accounting period.
(c) Other claims must be made within four years of the end of the acc. period unless a different time limit specified.
How long must company keep records?
Companies must keep records until the latest of:
‣ six years from the end of the accounting period
‣ the date any enquiries are completed
‣ the date after which enquiries may not be commenced
(b) All businesses records and accounts including contracts and receipts must be kept
(c) Failure to keep records can lead to a penalty or up to £3,000 for each accounting period
affected
How are Compliance Checks done ?
HMRC may enquire first give written notice.
(b) The notice must be given within a year after the later of:
‣ 12 months following the date the return is actually received by HMRC
‣ If the return is late, 12 months following the 31/1, 30/4, 31/7, 31/10 that next follows the actual date of delivery.
(c) An enquiry may be made due to:
‣ A suspicion income is understated
‣ Deductions being incorrectly claimed
‣ Other information in HMRC’s possession
‣ Being part of a random review process
When is a derminations and Discovery assessments issued ?
(a) If a return is not delivered by the filing date, HMRC may issue a determination of the tax payable within 3 years of the filing date.
(b) If HMRC believe that not enough tax has been assessed for an acc. period they can make a discovery assessment to collect the tax.
(c) A discovery assessment can only be made if:
HMRC could not reasonably be expected to have been aware of a loss of tax and are supplied
with information to draw their attention to a contentious matter such as the use of a valuation
or estimate. HMRC can raise an assessment within 4 years from the end of the acc period; this is extended to 6 years if there is a careless error or 20 years if there is a deliberate error or failure to notify a chargeability to tax.
When can a company appeal ?
(a) The company can appeal against amendments to the corporation tax return.
(b) The appeal must be normally be made within 30 days of the amendment and must state the
grounds for appeal.
(c) The appeals procedure is as per VAT
What are the Corporation tax return rules?
(a) Companies that do not receive a tax return are required to notify HMRC if they have income or
chargeable gains on which tax is due. This must be done within 12 months from the end of the
accounting period in which the liability arises, otherwise the standard penalty for late notification will arise.
(b) The filing date for accounts and computations is 12 months after the end of the financial
accounting period. Returns must now be made online and any corporation tax paid electronically.
(c) If the accounts and computations are filed late there is a fixed penalty of £100. If the return is
filed more than 3 months after the filing date the fixed penalty is increased to £200 (These
penalties become £500 and £1,000 if it is the third consecutive time the return is late).
(d) Returns may be subject to a random or specific enquiry by the HMRC. Written notice of the
HMRC’s intention to make an enquiry is given within 12 months from the date the return is
received by HMRC.
(e) There will be an additional corporation tax related penalty of 10% of the tax unpaid 6 months
after the return is due, if the self-assessment tax return is more than six months late, or 20% of
the tax unpaid 6 months after the return is due, if more than 12 months late.
(f) HMRC may amend a return to correct obvious error within nine months of the day the return is
filed. A company may amend a return within 12 months of the filing date.
What are the Penalties for incorrect returns ?
The amount of penalty is based on the amount of tax understated, but the actual penalty payable is
linked to the taxpayer’s behaviour, as follows:
(a) there will be no penalty where a taxpayer simply makes a genuine mistake.
(b) moderate penalty (up to 30% of the understated tax) where a tax payer fails to take reasonable care.
(c) higher penalty (up to 70% of the understated tax) if error is deliberate.
(d) higher penalty (up to 100% of the understated tax) where the error is deliberate and there is also concealment of the error.
A penalty will be substantially reduced where the taxpayer makes disclosure, especially unprompted
disclosure to HMRC.
