It’s official: thousands are on the wrong tax code!

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With the tax return deadline being only hours away (midnight 31 January 2014) there is still time to get professional help if you need it – particularly because HMRC  often get it wrong according to new research by UHY Hacker Young.

In just one example, HMRC sent a tax bill to a pensioner which demanded over £576k in tax! With an income of only £11k per annum this was clearly incorrect but what if it had been only hundreds of pounds wrong – would the pensioner have noticed and, if so, would he have been confident enough to question it with the might of HMRC?

According to the research, HMRC employees have been making ‘basic’ errors which have led to problems such as people being on the wrong tax code and consequently underpaying or overpaying tax. While underpaying it may sound attractive on the face of it, chances are the system will catch up and then a correction will need to be made later on, leaving the taxpayer with an unforeseen bill to pay – a real blow for cashflow.

While the UHY Hacker Young research cites an error rate in 2013 of 37% in the sample tested, HMRC are arguing that the research is wrong and that their PAYE coding notices are 99% accurate. Either way, when you consider that Read more

Tax return help 7 days a week!

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By midnight on 31st January 2014, you will need to have submitted your self-assessment tax return to HMRC and have paid them any tax due for the 2012-13 financial year. It doesn’t matter if you have zero tax to pay – you still need to submit your tax return on time or you will be hit with an automatic penalty of £100 (delaying even further can, in the worst case scenario, increase this fine to as much as £1,600).

In view of this, for the month of January you can get help 7 days a week from Taxfile in Tulse Hill, South London.

Our team of tax advisers and accountants can help you with your return whatever your employment status. We can help you register with HMRC if you are not already registered, check your form and help fill it in where necessary, make sure you’ve claimed for any allowable expenses to offset tax, make sure you haven’t missed anything or claimed for something you shouldn’t have claimed, compute any tax due (or due to be refunded), and submit your tax return on-line (the only option available this late into January – paper returns are already too late!). Read more

Received an SA302 form from HMRC?

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If you’re ever wondering why you were sent form SA302 through the post, it will usually be for one of 3 reasons:

  1. if you sent in a paper tax return asking HMRC to calculate the tax for you;
  2. if you made an amendment to your paper tax return; or
  3. if you sent HMRC a paper tax return and they don’t agree with your calculations for tax.

You will also have received a covering letter explaining the period under scrutiny, the income tax due (or owed) for that tax year with a note of when it’s payable, an explanation of any changes made by HMRC to your figures and lastly information relating to any payments on account which may be required for the next tax year. Read more

Newsflash: Tax return deadline extended

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It’s not often we receive good news from Her Majesty’s Revenue & Customs, but today is a wonderful exception! In case you haven’t yet heard, the penalty deadline for 2011 tax returns has now been extended to 2nd February 2012. This is due to industrial action at HMRC on the 31st January.

(Information courtesy of Lynsey).

Lump sums, redundancy & compensation payments

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When dealing with lump sums, redundancy and compensation payments great care needs to be exercised. The reason behind this is that this type of income will not necessarily be taxed as normal employment income.
Up to the first £30,000 of any compensation payment can be paid to you without deduction of tax if it is made in connection with the termination of your employment. This also applies to statutory redundancy payments. This tax exemption applies whether the payment is made as a result of an unfair dismissal claim or for breach of contract.
In order to qualify for compensation for loss of office relief, strict criteria must be met.
For instance, if your contract of employment gave you a right to compensation on ceasing to be employed or payment in lieu of notice (i.e. the employer pays in lieu of notice instead of the employee working the notice period), then the lump sum you receive will be taxable under PAYE scheme, regardless of the amount.
Also, even if the contract says nothing about pay in lieu of notice but there is an expectation of payment because it has been routinely paid to others, that constitutes an implied contractual term and the payment will still be liable to tax and NICs.
HMRC often challenges this aspect, trying to prove that the payments were contractual in nature therefore they need to be fully taxed.
Very important to remember is that the limit of £30,000 relief relates to each employment but employments with employers under common control only count once. If a payment was received in the previous fiscal year for the same employment but the relief was not used, than the balance can be claimed against any relevant payments in a subsequent year.
Some employees with redundancy payments that exceed £30,000 choose to pay some or all of the excess into their approved occupational pension scheme. As long as the payment is within the scheme’s rules, it has no liability for tax or NICs.
As different rules apply to different lump sum payments connected with an employment it is very important to seek advice from professionals like Taxfile‘s tax accountants in South London and Exeter. They will make sure that your circumstances have been carefully considered before submitting your tax return to HMRC.

Tax return deadlines: taxpayers’ worse nightmare

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Have you ever felt overwhelmed by not having enough time to cope with your tax affairs in time?
During the tax year (6 April one year to 5 April the next) there are important dates , let’s call them key dates, by which you need to send in your tax return and make certain payments. It’s important to be aware of these dates as HM Revenue & Customs (HMRC) imposes penalties, interest and surcharges if you miss them.
• 31 January
This is the formal deadline for sending back a tax return received by the previous 31 October. If it arrives after this deadline you’ll be charged an automatic £100 penalty.This is also the deadline for paying the balance of any tax you owe, referred as ”balancing payment”.HMRC will charge you daily penalties until they receive your payment.
• 30 September
Paper tax returns for the tax year that ended on the previous 5 April must reach the HMRC by this date if you want them to calculate your tax for you, tell you what you have to pay by the following 31 January or collect tax through your tax code (if possible) where you owe less than £2,000 .
If they receive your paper tax return after 30 September and process it by 30 December, they’ll still calculate your tax and try to collect tax through your tax code; but they can’t guarantee to tell you what to pay by 31 January.
If you file your tax return online the deadline is later (see below) because the system calculates your tax liability for you automatically on-screen.
• 28 February
If you don’t pay the balancing payment by 31 January, you’ll be charged an automatic 5% surcharge on top of the amount still owing. This is in addition to any interest payments.
• 31 July
This is the deadline for making a second ‘payment on account’ for tax owing for the preceding tax year.
If you still owe tax that you were due to pay by the previous 31 January, you’ll be charged a second automatic 5% surcharge on top of the amount you owe.
Taxfile‘s tax accountants in South London took a group policy for all their customers in order to protect them from any extensive work generated by an enquiry from the tax office. In order to help us protect you from the taxman you need to send your tax return in time.
Taxfile can also protect new customers for their last tax return, provided they sent their return in time, before the deadline.

Rent a Room Scheme

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If you’re thinking about letting furnished rooms in your home, you may want to take advantage of the special Rent a Room Scheme . Under this scheme you can be exempt from income tax on profits from furnished residential accommodation in your only or main home if the gross receipts you get (that is, before expenses) are £4,250 (£2,150 if letting jointly) or less. But you can’t then claim any of the expenses of the lettings.
A lodger can occupy a single room or an entire floor of your home. It does not apply if your home is converted into separate flats that you rent out. In this case you will need to declare your rental income to HM Revenue & Customs (HMRC) and pay tax in the normal way. Nor does the scheme apply if you let unfurnished accommodation in your home.
There are certain advantages and disadvantages of using this scheme –Taxfile in South London can help you choose the best option according to your specific circumstances. Their tax accountants will work out whether you’re better off joining this scheme or declaring all of your lettings income and claiming expenses on your tax return.
The main point to bear in mind is that if you are in the Rent a Room scheme you can’t claim any expenses relating to the letting (for example, wear and tear allowance, insurance, repairs, heating and lighting).
If you don’t normally receive a tax return and your receipts are below the tax-free thresholds for the scheme, the tax exemption is automatic so you don’t need to do anything.
If your receipts are above the tax-free threshold, you must tell your Tax Office – you can do this by completing a tax return and claiming the allowance.

That’s all for today. Next week we will discuss, in more detail, the allowable expenses that you can deduct from your lettings income, provided you don’t use the Rent a Room scheme.

CIS Contractor Monthly Return

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CIS contractors must complete and file a tax return to the HM Revenue and Customs every month showing the payments made to all subcontractors as well as the tax deducted. The contractor needs also to show the verifications references against all those subcontractors from whom the contractor had to deduct a higher tax rate.
Even if no payments were made to subcontractors, contractors still need to submit a monthly return , in this case a nil return.
Starting from 19th October, HMRC will start charging building contractors penalties for late returns. The contractor monthly returns should be submitted to the Inland Revenue by the 19th of every month. After this date, any return not received from contractors by the due date will be liable to a fixed penalty of £100 and a further penalty for every additional month that the return remains outstanding.
There are three ways to submit the return:
•on paper through the post
•online through the HMRC website
•electronically through Electronic Data Interchange or through approved third-party software.

Yesterday, the 26th October, HMRC showed some sympathy towards contractors’ late returns due to the postal strikes. Those who file electronically have no problem submitting their returns. ”Nil returns can continue to be made by telephone and HMRC are also prepared exceptionally, during continuing disruption, to accept paper returns at their Enquiry Centres.
There are likely, however, to be some contractors whose returns, will not be received by the 19th October, even though posted in what would normally be good time to meet the deadline. HMRC are prepared to consider these cases sympathetically.
Contractors can make nil returns and get further assistance by telephoning the CIS Helpline on 0845 366 7899.”(HMRC)
Taxfile in South London can help you filing your monthly return making sure it is done in due time. Their tax accountants will also be able to verify your subcontractors with HMRC in order for you, the contractor to deduct the right amount of tax.