Taxman's IT glitch threatens self-assessors
Freelance consultants are more likely to face hefty fines for missing next month's self-assessment deadline because of a glitch in HM Revenue & Customs' online system.
Experts at the Institute of Chartered Accountants in England & Wales, which discovered the problem, say taxpayers who filed this month were told they were no longer registered for e-filing.
Although their user identifications and passwords were accepted by HMRC's portal, their details as online self-assessors had mysteriously disappeared off the authority's database.
HMRC's helpline advised they must re-register for online self-assessment, meaning the taxpayers had to wait for new activation codes, which can take up to seven days to arrive.
Fortunately the affected taxpayers did not have any outstanding tax to pay, but taxpayers who leave their filing nearer the end of January may face fines if the problem reoccurs.
Self-assessment tax returns for the year ended April 5, 2006 must be filed with HMRC no later than midnight on January 31, 2007. Late returns will result in a penalty of £100.
The taxman's confirmation message it e-mails to taxpayers once it has received their returns has also been hit by a computer glitch, but this problem has now been resolved.
On top of the automatic penalty of £100 charged for returns not received by 1 February, if the tax return is still outstanding by 31 July, a second £100 fine is imposed.
A penalty can also be incurred based on the amount of tax owed for the year if returns are still overdue 12 months after the filing date.
Jane Moore, of the institute's Tax Faculty, said: "It's true that tax returns can be complicated and confusing, and this often depends far more on the circumstances of the taxpayer rather than their wealth, but missing the deadline is just not worth the penalties.
"The ICAEW has produced a list of 'top tips' for the 2007 deadline which provide sound guidance for those with relatively straightforward affairs; but if you find yourself struggling with the form, contact a chartered accountant. We can provide professional advice and save a lot of time and stress."
The Tax Faculty's top tips are as follows:
1. Do you definitely need to complete a Tax Return? Not everyone needs to so confirm with HMRC before starting work on your return.
2. Filing your Tax Return online is quick and easy and using the Revenue's own software keeps your costs down. Online filing avoids the possibility of processing errors and also ensures your form reaches HMRC safely since you immediately get a receipt.
3. If you want to complete your form online you will need a User ID and a chosen password. These take a week to come through so make sure you do this early.
4. A form that is not completed correctly can be rejected by the Revenue. It is therefore important to carefully check that there are no errors. Don't forget to sign and date the form and try not to leave any blanks.
5. Records of all information used to complete tax returns must be kept for 22 months after the end of the tax year, or for 5 years and 10 months for those carrying on a business or who have income from letting out property. There is a maximum penalty of up to £3,000 for each tax year for which records have not been kept.
6. If you haven't been sent a self assessment tax return but have a new source of income or capital gains in 2005/06 on which you need to pay tax, you will need to ask for a Tax Return. You must ask by 6 October 2006.
7. Keep a photocopy of your completed Tax Return. Sometimes they do get lost along the way and you don't want to have to do it all again.
8. Keep a copy of tax return guidance notes, but make sure that you also have any corrections pages which will be available on the HMRC website.
9. If you want to claim a repayment of tax and haven't been sent a Tax Return, then you only need to complete a Form R40, Claim for Repayment. HMRC also provide a helpful summary of who does and who does not need to complete a Tax Return.
10. Compare the return with the previous years form. If there are any significant changes note the explanation for them on the form.