Tax Returns

 When should you use the tax return white space?

The final deadline for completing your 2012/13 tax return is approaching. Do you have most of the figures ready?
Are there one or more transactions giving you a headache about what you should and should not declare to HMRC?
Don’t miss the deadlines!

The deadline for submitting personal self-assessment tax  returns on paper was 31 October. However you can still submit them online by 31 January – failure to do so will result in a £100 penalty.

But what should you do if you or your accountant can’t decide what to declare for a particular transaction because it was complex or might be open to a different interpretation by HMRC?

Use the white space

The law states you must provide any additional information you think HMRC will need to check your tax bill. This is where you should make use of the so-called tax return white space. Whether you’re using HMRC’s system or other software to complete your return, you’ll be asked if you want to supply any extra information, and anything you enter will go into the white space.

In most cases, if you don’t use the white space to explain a questionable tax return entry it won’t cause you any trouble, however if HMRC decide to question your tax return and they think you’ve not supplied the information you should have, the result might be a penalty charge or a greater penalty, if it turns out you made a mistake.

Don’t get caught in the Trap.

Not many people are aware that failing to provide the correct  additional information means HMRC has much longer in which to challenge your tax return. If HMRC can show you left off information because you were careless, it will have six years in which to issue an assessment to collect extra tax due, and if it can show you did it deliberately, it will have 20 years.

Do I need to use the white space?

There following situations are where we think you should always use the white space:

  1. To back up a complicated entry on a tax return, for example, a capital gains tax calculation on the sale of your home where you have used part of it for business.
  2. Where you aren’t sure of a figure; for example, where the tax rules require you to make a judgement, say, on the amount of a business expense to claim.
  3. Where you know the entry you’ve made differs from what HMRC would expect. For example, where you’ve claimed tax relief which HMRC’s guidance says you aren’t entitled to.

Points to note

1.HMRC’s policy is not to look at the white space unless a question is raised about one of the entries on your tax return. So you are wiser to  include any additional information you feel maybe relevant.

2. Don’t forget that you are responsible for the entries on your tax return even where your accountant completes it for you. So don’t just check the figures – make sure a white space entry is included if appropriate.

Child Benefit

Self-assessment

Have you missed the child benefit deadline, what’s the penalty?

HMRC has revealed that an estimated 165,000 people have failed to register for self-assessment regarding collection via tax of their child benefit. Are you one of them, will you get a penalty?

Who needs to register?

New rules implemented in January this year  meant that child benefit was withdrawn entirely if the highest earning parent earns more than £60,000 per year. The new laws ruled that the child benefit is reduced gradually for families where the highest earner has taxable income of between £50,000 and £60,000. Taxable income is made up of earnings from employment, dividends and interest received. Therefore, families where at least one parent has a taxable income of more than £50,000 technically you would have needed to have signed up for self-assessment by 5 October 2013.

What’s the penalty? The media have been reporting parents face a possible fine of “hundreds of pounds” for not registering by the deadline. But this isn’t actually true. There are no special penalty rules for the high income child benefit charge, so failure to register for self-assessment by 5 October 2013 does not, on its own, lead to a tax penalty.

Your will receive a penalty, which could be up to 100% of the tax due, if you:

  •      fail to file a tax return and pay any tax due by 31 January  2014; or
  •      make an error on your tax return which understates your tax liability.

Contrary to what the papers say, there’s no special penalty for not registering by 5 October provided you file your return and pay any tax due by 31 January 2014.