£100 penalty for missing 31 January filing deadline - even if there's no tax to pay
The end of this month will see the first casualties of HMRC's tough new system of penalties for the late submission of Self Assessment returns. Anyone who has received a self-assessment tax return should submit it online before 31 January - even if there is no tax to pay.
The vast majority of people who receive a Self Assessment tax return no longer submit paper returns, but instead submit online before the deadline of midnight on 31 January. Many of these will be people who, having no outstanding tax to pay, will assume that the deadline does not apply to them. They must still however submit an online return by this date or face an automatic £100 penalty.
The penalty is actually for late submission of your tax return, not for unpaid tax, and in previous years was cancelled if there was no tax outstanding. Self assessment is a more efficient way to collect tax as it puts the onus on individuals to declare and pay the correct amount at the right time. But with it came the notion that if you owed nothing you should not be penalised. This latest move potentially punishes non-taxpayers, which hardly seems progressive.
HMRC to review Business Records Checks
We are pleased to hear that HM Revenue and Customs has announced a review of its Business Records Checks scheme. Following the pilot phase from April to June last year, HMRC intended to examine the income and expenses records of 20,000 businesses this year, with potential fines of up to £3,000 for those with inadequate records.
The review is good news; while we understand that HMRC must pursue people and businesses that don't pay the correct amount of tax, we are very concerned about the amount of regulation the BRC scheme would put on small businesses.
It really is using a hammer to crack a nut. Gone are the days when a small business client would turn up to a meeting carrying a plastic bag filled with old receipts, and expect their accountant to sort it all out. Smaller businesses have greatly improved the quality of their record keeping - largely as a result of pressure from their accountants.
Consultation needed for General Anti-Avoidance Rule
It is increasingly likely that the government will introduce general anti-avoidance legislation to curb tax avoidance by companies and wealthy individuals. But it is disturbing to hear such an important business issue being discussed in increasingly political terms, with ministers talking about irresponsible capitalism and a wealthy elite being advised by armies of accountants.
The "elite" is by definition a minority. The army of accountant exists, but it is helping our small and medium sized businesses cope with a weak economy and complex tax legislation - often through bespoke schemes (such as enterprise management incentives and capital allowances) that have been pre-agreed with HMRC.
The government has stated that it will not introduce legislation without formal public consultation, but its track record on consultation on high-profile issues has not been good, as the continuing legal argument on cutting feed-in tariffs demonstrates.
It is more important than ever that we have wide-ranging consultation with professional tax advisers over this issue. Poor legislation will allow the few to continue avoiding tax whilst placing a needless burden on the many who already follow the letter and spirit of the law.