| Frequently Asked Questions - Tax & Taxation |
|
This information applies to England, Wales, Scotland and Northern Ireland
General Questions
Capital Gains Tax
Enquiries
What is a tax returnA tax return is a form on which you must give details of your income and expenses, if asked to do so by HM Revenue and Customs (HMRC). The tax return is then used to calculate the amount of tax that you are due to pay. (back to top)Who should complete a tax returnNot all taxpayers are required to fill in tax returns. This is because returns are not normally issued to those taxpayers whom HM Revenue and Customs (HMRC) believes are paying the correct amount of tax. Returns are therefore not usually issued to people who have salaries and pensions taxed under Pay As You Earn (PAYE), since it is usually assumed that the correct amount of tax is being deducted at source. Returns are routinely issued to taxpayers whom HMRC believes have:-
Even though returns are not normally issued if you pay tax under PAYE, HMRC may send one to you as a way of checking that your tax affairs are in order. This is quite common where you have changed jobs, or moved from a salary to an occupational pension. If you know that you have not paid the correct amount of tax on your income for a particular tax year, you should not wait for HMRC to send a tax return but should contact your local tax office. Otherwise, you may incur penalties or pay more tax than is necessary. Where you have received income on which tax is payable, and no tax return has been issued, it is your obligation to notify your tax office of the income received. This should be done in writing, and by no later than the 6 October following the end of the tax year in which the income was received. If you fail to notify HMRC of your income, this can lead to penalties and interest on the outstanding tax. If you write to notify HMRC of untaxed income, you will be sent a tax return form, so it is often simpler to telephone HMRC for a tax return form and use this to report the income concerned. HMRC has a legal right to demand completion of a tax return from anyone, and where a return form has been issued the tax office will normally insist upon its completion. Completing the tax return formThe tax return consists of a main form, which everyone who receives a tax return has to complete, and nine supplementary pages which people with certain types of income have to fill in. There is also an accompanying booklet that gives further guidance on how to fill it in. If you do not provide all the information required on the form, this will be regarded by HM Revenue and Customs (HMRC) as the tax return not being completed. This would leave you liable to pay interest and possibly penalties. You have a duty to keep records of your income and, each year, you should receive documents from your employer or pension administrator which give details of the income you have received, including any fringe benefits. You will need these records and documents to be able complete a tax return. If there are certain questions on the tax return that you do not have the information to answer, you should enter an estimated figure and let the tax office know when you have the actual figure. Previously you could enter ‘per PAYE’, or ‘as returned by employer’ on the tax return, but under the new rules of self assessment, doing this could lead to penalties. If you need more help with completing a tax return, you should consult an experienced adviser. Self-employed or rental incomeIf you have been self-employed, or are receiving rental income from property which is not within the rent a room provisions, details of this income will need to be reported in the appropriate supplementary pages of the tax return. On the supplementary pages, you will normally have to give details of expenses incurred in the course of running a business, or renting out property which is not within the rent a room provisions. If you need more information about how self-employed or rental income is taxed, you should contact a professional taxation adviser. Deadline for sending back a tax returnYou must send your tax return back to the local tax office by the 31st September 2007 following the end of the tax year. If you do not do so, you will automatically incur penalties. Errors on tax returnsIf you or the tax office finds a minor error on a tax return, this can often be remedied quite simply by correspondence. If your income was overstated, resulting in you paying more tax than is actually due, HM Revenue and Customs (HMRC) will repay the amount of the overpayment with the appropriate amount of interest - ONLY if you ask them - they will not voluntarily give you the money back. If, however, there is a significant error, for example, if income was under declared, the tax office may consider this to be grounds for opening an enquiry into the tax return which may lead to prosecution. If you need help with a tax office enquiry, you should consult an experienced adviser. If HMRC have confirmed that I am not resident in the United Kingdom why do I need to complete a Self Assessment return?Although you are not resident in the United Kingdom your UK sources of income are liable to UK tax. HMRC will send you a return so that they can establish if you have any ongoing UK liability If I am working abroad; do I need to complete the employment page?
If you are not resident for the whole
of the tax year and perform none of your duties in the United Kingdom
you do not need to complete an employment page. Why can't my earnings be coded NT - I work abroad?
If you are not resident in the UK and
all the duties of your employment are carried on abroad then you can
have NT (no tax), code operated against your earnings. You will need to
apply to HMRC to ask them to do this on an annual basis. If parts of
your duties are performed in the UK then your employer needs to deduct
tax from your earnings according to the code that they issue. What will happen if I do not complete my return?If you do not complete the return that you have been sent, you will automatically be charged penalties and interest. What if they don’t issue a return to me and something has changed?If you have a new source of income or your circumstances change you must notify HMRC for them to issue returns to you, failure will also result in interest and penalties Why I am charged tax on rental income when I have been granted exemption?
The rents that you receive from
letting your UK property are liable to UK tax and cannot be exempted.
You may have received approval for your rents to be paid without
deduction of tax but you may still have a tax liability which will be
assessed at year end and you will have to make the payments of tax
direct to the Collector in accordance with the notice issued to you. I am not resident in the UK, am I liable to capital gains tax?
If you are not resident in the UK but
you are ordinarily resident here, then you are liable to capital gains
tax for each year that you are ordinarily resident here. If I am going to live abroad for less than 5 years, would I be liable to capital gains tax if I dispose of my shares whilst I am not resident and not ordinarily resident in the UK?
It depends. You will be liable to
capital gains tax on the disposal of any shares you acquire before you
leave the UK if you are resident or ordinarily resident here for at
least part of each of 4 out of the 7 tax years immediately before the
year of your departure. If you are liable, any gain or loss on your
disposals would be assessed in the year you return to the UK How long do I need to be abroad to avoid being liable to capital gains tax?
It really depends on when you left
the UK. If you left the UK on or after 17 March 1998 you would need to
be not resident and not ordinarily resident in the UK for at least 5
full tax years between the year you left the UK and the year of your
return. I am planning on leaving the UK; will I be liable to capital gains tax if I sell my home before or after I leave the UK?
In most cases you will not pay tax on
any gain you make when you dispose of your only residence. You may be
liable to capital gains tax if you leave your home or have a second
property. I am leaving the UK shortly, am I liable to capital gains tax in the year I leave the UK?
Yes, but if you cease to be resident
or ordinarily resident in the UK, you may, by concession (extra
statutory concession D2), not be liable to capital gains tax on gains
arising to you from disposals made after the date of your departure.
However, you can only qualify for this concession if you were neither
resident nor ordinarily resident in the UK for the whole of at least 4
of the 7 tax years immediately preceding the tax year in which you
leave the UK Do I need to send in my P60 or a copy of my form P11D / P9Dwith my return?No. Just put all of the details from these forms on your Tax Return. But you must You should keep your P60 and copy of form P11D / P9D with the rest of your tax records in case there are any queries about your return. (back to top)My employer hasn't shown all my expenses on form P11D / P9D. He says he has a dispensation. What is it?
It's an arrangement an employer has
with the tax office. It saves you the trouble of declaring those
expenses covered under the dispensation, and then making a claim for
the same amount of allowable expenses you've paid out. For you it makes
no difference and you do not need to show these items on your return Why are HMRC enquiring into my tax return or claim?Each year HMRC select some returns and claims for an enquiry. It is your responsibility to ensure that the entries on your tax return or the details in your claim are right. They enquire into a percentage of all returns and claims to check that they are right. What if at the end of an enquiry there is more tax to pay?Unless you appeal within 30 days and ask for some, or all, of the tax to be postponed, this tax will be due in full by the "filing date" (normally 31 January when your return was due), or within the next 30 days, whichever is later. Will I have to pay interest on the additional tax?
Usually yes, Interest is
automatically charged on tax that is paid late. It is late if it is
paid after the filing date (normally 31 January when your return was
due). Even if you pay all of any extra tax within 30 days of receiving
the enquiry closure notice, interest will still be charged if this is
after the filing date. |