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Taxpayers need to be extra careful when preparing their tax returns or face an increased risk of being investigated by HM Revenue and Customs (HMRC), claim business advisers Grant Thornton. The warning comes as HMRC staff threaten to strike during the annual last-minute scramble to file self assessment forms.
Gary Ashford, tax investigations director at Grant Thornton, makes the point that self assessment is becoming increasingly complicated following recent tax cases and the growing complexity of tax legislation. Ashford expects a sharp increase in the amount of investigations conducted by HMRC over the next year or so.
Ashford adds that with the deadline having passed for the first ever tax 'amnesty' for offshore bank accounts (Offshore Account Disclosure Initiative), HMRC will be carefully combing through individual tax returns to check that the accounts disclosed as part of the 'amnesty' are also included on the 2007 return.
"HMRC are currently reviewing the disclosures made as part of the offshore account initiative and it is widely expected that the taxman will test out its newly merged criminal powers on some of those who did not disclose under the 'amnesty'. Therefore, anyone who still has some offshore funds to reveal would be wise to make a disclosure now before HMRC descends on them.
"Regardless of whether you've an offshore account or not, individuals need to make sure their tax return is correct and sent in on time or face the consequences, whether they be penalties, or, in more extreme cases, investigation," he says.
Francesca Lagerberg, head of Grant Thornton's national tax office offers the following self assessment tips.
1- Make sure you sign the return. Forgetting to sign is one of the most frequent errors on hard copies of the return and can lead to a missed deadline.
2- Always identify anything contentious in the additional information box; it may save an enquiry into the return.
3- Remember to make an entry in box 19 if you want to receive a refund of any tax overpaid in the year. You can choose to have your refund paid directly to charity and you will then receive tax relief on your refund. If you do not claim a refund, HMRC will keep it as a credit on your account.
4- You must complete Capital Gains Tax pages either if the disposal proceeds exceed £35,200 in total, your taxable gains exceed £8,800 (the annual exempt amount for 2006/07), losses are being offset against gains totalling more than £8,800 (before the offset), claims or elections are being made or if a capital gains tax liability arises on your main residence.
5- Keep a log of all gift aid payments made in the year and anything you have ticked the gift aid box on i.e. sponsorship forms. If you are a higher rate taxpayer you will be due relief.
6- If you find you have not got all the extra pages you need to fill in your return you can obtain these forms by ringing the order line on 0845 9000 404, but if you wish, you can download them from the Internet using the Self Assessment Section of HMRC's website ( www.hmrc.gov.uk) .
7- Get hold of copies of all your income and benefits. If you are an employee you should have been sent a P60 by your employer setting out your salary and tax paid in the year and possibly a P45 if you changed jobs during the tax year. If you have any taxable benefits, like a company car, your employer should have sent you a Form P11D listing those you need to report.
8- Income tax is payable in instalments. Apart from the balancing payment for 2006/07, which is due on January 31st, you may also have to make the first interim payment for 2007/08. This will normally be based on your income tax liability for 2006/07, but you can apply to reduce the interim payment if you have good reasons for believing that the tax liability for 2007/08 will reduce from the previous year.
9- Those who have overpaid tax during 2006/07 will benefit from filing their self assessment form. This particularly appeals to those who have savings taxed at source and those who have spent time abroad.
10- Finally if you get into difficulty, you can ring HM Revenue and Customs Helpline on 0845 9000 444, or visit the website at www.hmrc.gov.uk.
23 January 2008 © Moneyextra.com
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