Chapter 17- Self assessment and payment of tax by individuals

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Chapter 17- Self assessment and payment of tax by individuals by Mind Map: Chapter 17- Self assessment and payment of tax by individuals

1. Five years after 31 January following the tax year where the taxpayer is in business

2. The self assessment system

2.1. Relies upon the taxpayer comleting and filing a tax return and paying the tax due

2.2. Notifications of liability to income tax and capital gains tax

2.2.1. Individuals who do not receive a tax return must give notice within 6 months- % October 2019 for 2018/19

2.2.2. HMRC will issue a notice for the taxpayer to make a return

3. Tax returns and keeping records

3.1. Tax returns must usually be filled by 31 October (paper) or 31 January (electronic) following the end of the tax year

3.2. Keeping records-Later of:

4. Payment of income tax and capital gains tax

4.1. Income tax due date:

4.1.1. Two payment ( 31 January during tax year, 31 July following tax year

4.1.2. Final balancing payment due 31 January after the tax year

4.2. CGT- 31 January after the end of the tax year of disposal

5. HM Revenue Customs (HMRC) powers

5.1. Compliance check enquiries

5.1.1. Within 12 months from actual filing date

5.1.2. Within 12 months after quarter day following actual filing date if it is late

5.2. Determinations

5.2.1. Must be made within 4 years following the end of the relevant tax year

5.3. Discovery assessment may only raised where a return has been made if:

5.3.1. Careless or deliberate understandment

5.3.2. Did not have information

5.4. Dishonest conduct of tax agents

5.4.1. Civil penalty of up to $50000

6. Disputes and appeals

6.1. Internal reviews

6.2. Tribunal hearings

7. Self assessment and claims

7.1. Amending the self asessment

7.1.1. The tax payers may amend their return for Year 1 within 12 months after the filing date

7.1.2. Filing date- 31 January of Year 2 or the last 3 month period starting with the issue

7.1.3. HMRC may correct obvious errors within 9 months of the actual filing date

7.2. All claims and elections which can be made in a tax return must be made in this matter if the return has been issued

7.3. Recovery of overpaid tax

8. Interest and penalties

8.1. Interest on late paid tax

8.1.1. Assumed rate of interest in unpaid tax is 3%

8.2. Repayment of tax and repayment supplement

8.2.1. Assumed rate of interest on overpaid tax is 0.5%

8.3. Penalties for errors

8.3.1. Late returns

8.3.1.1. <3 months - $100

8.3.1.2. 3-6 months - $100+$10 per day ( max of 90 days)

8.3.1.3. >6 months - Penalties as before + 5% of tax due ( min of $300)

8.3.2. Late final payment

8.3.2.1. Penalty date is 30 days after the due date of tax

8.3.2.2. <5 months after - 5% of tax unpaid

8.3.2.3. 5-11 months - 5%+5% of tax unpaid at the end of the 5 month period

8.3.2.4. >11 months - Two 5% penalties+5% of tax unpaid end of 11 month period