Tax Administration and Compliance: Returns, Payments and Penalties
Self assessment and filing
Understand who must file a self assessment return, the filing deadlines (paper and online), and the consequences of late filing. The return covers income, gains, reliefs and payments on account. Keep records for the required period and be ready to amend a return within the amendment window.
Payments on account and balancing
Payments on account are based on the previous year's tax (excluding certain items such as CGT and student loan repayments) and are made in two instalments. A balancing payment settles the difference. Know the threshold below which payments on account are not required and the rules for reducing payments on account.
Penalties and interest
Learn the penalty regime for late filing (fixed and daily penalties, then percentage-based), late payment (percentage-based over time) and inaccuracies in returns (careless, deliberate, deliberate and concealed). Interest runs on late payments. Understand reasonable excuse and the appeals process to the tribunal.
Compliance checks and traps
HMRC can open enquiries; know the time limits and the taxpayer's rights. Traps: confusing the filing deadline with the payment deadline; forgetting that payments on account do not apply below the threshold; mixing up penalty percentages for different behaviours; assuming an amendment is always free of penalty.
Worked example: Taxpayer's previous year's tax was £4,000 (no CGT). Payments on account are £2,000 each, due 31 January and 31 July. If actual tax is £4,500, the balancing payment of £500 is due with the second instalment. If the return is filed late, fixed penalties apply, escalating with delay; interest also accrues on the unpaid balance.