As of today there are only 7 working days till the 31st January 2017, which is HMRC's online self assessment deadline.

The submission of the personal income tax return and the payment of any tax and NI due for the period 6/4/15 to 5/4/16 is midnight 31/1/17. And anyone who has not yet had their tax return done and paid for should start to worry about the up to £1300 fine plus interest on late paid tax imposed by HMRC for missing the deadline.

The self assessment / personal tax return is required from the following types of people:

1. Self Employed (even partially) during the tax year 15/16 ie 6/4/15 to 5/4/16
2. Employed and earning over 100k for the year ended 5/4/16
3. Director or shareholder of a Company and taking dividends in the period as above
4. If you have received rental income in the period 6/4/15 to 5/4/16
5. You received savings and investments income in the period 6/4/15 to 5/4/16
6. You sold something and made a profit on the item, so are required to pay the Capital Gains Tax (CGT) eg selling shares, a property, an antique, Plant and Machinery etc
7. You have received income over £50,000 and you claimed Child Benefit
8. If you have not notified HMRC that you have left self employment and they have not confirmed that you do not need to do a 15/16 return
9. A letter / email / text from HMRC has been received by the tax payer advising them that they need to submit a tax return for the 15/16 year (note: only new registrants may get a reminder as HMRC expects old registrants to already know the deadlines and protocols required).
10. You received income from overseas
11. You lived abroad and had income from the UK
12. You are retired and receive more than one type of pension and annual income payment pushing you over the personal income allowance
13. You have had a P800 from HMRC saying you have not paid enough tax in the year
14. You are  minister of religion or and Underwriter
15 Even if a person has died they may still need to submit a tax return to make sure they have paid the correct tax and those that receive an inheritance may need to pay for Inheritance Tax (HMRC will advise further).
16. If you have received a P11d and not paid the correct tax for the benefit in kind eg company car, private medical, gym, travel etc

So if you haven't already had your tax return done and still need to send / drop in your income and expenses information, please take heed of this final reminder.

Those that have handed in their information we will make sure it is done before the deadline. We can even have your deadline extended in some cases as we are registered authorised agents for HMRC.

And if your thinking of using an accountant, note, that not all accountants are the same. We recommend you use an expert in tax so he/she saves you far more in tax than you ever have to pay them for their service.

With fines up to £1300 plus interest on the amount of tax due. In some cases penalties are greater than the tax that would have been due. So don't delay as you have no time left and most excuses and appeals are rejected by HMRC after a penalty has been imposed.

By Anni Khan at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Worcester Park and Kingston upon Thames they are considered in the Industry to be expert accountants and tax advisors for small businesses. Helping and supporting business throughout the UK, they regularly help clients grow their business providing tailored advice.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Deadline: 31/10/16 for Paper Tax Returns

For everyone already registered with HMRC for the tax year 6/4/15 to 5/4/16 they are required to submit their paper tax return by the 31st October 2016. And then to pay all tax and National Insurance payments for that period by the 31/1/17.

So if you have to declare a tax return for 2015/16 year then we urgently recommend you contact a reputable and experienced tax accountant like Tax Affinity Accountants (one of the most highly recommend companies in the accounting industry) as soon as possible.

It is of course possible to submit a tax return yourself and HMRC will direct you to do this, but what they purposefully fail to clarify is what various expenses and industry specific allowances are allowed to be claimed as legitimate deductions to help decrease your tax bill.

And a good accountant, as any successful business person will tell you, is usually worth his/her weight in gold when it comes to getting your numbers right and paying the correct and least amount of tax.

At Tax Affinity Accountants our motto is that 'an accountant should legally save you far more in tax than they should ever be charging for their service' ensuring every client gets the very best service at a fair and reasonable cost. So our service more than pays for itself for all our clients.

So if you have to do a 2015/16 tax return (or any other year) and would like us to help you. Or are already one of our very satisfied customers then please get in touch with us as soon as possible and avoid the late rush and have the most time put into your accounts.

HMRC can open an investigation into your tax affairs at anytime, and can request to go back up to 20 years (although it is normally no later than 6 years). When you receive a letter stating HMRC are pending an investigation, it can be a very tense and stressful time even if you have done nothing wrong.

Investigations can occur for a variety of reasons. The most frequent is an obvious mistake that HMRC can see whilst looking through the information you have submitted to them. The mistake can be on any scale of seriousness so should not be taken lightly. If you spot a mistake and tell HMRC about it, they will still have to open an investigation still but it will be less severe and strict. Sometimes, a business selected for an investigation is totally random, HMRC will pick a few businesses in an area, maybe that are tax-fraud hotspots, just to make sure there is no tax evasion going on. HMRC are also the epitome of suspicious. If your sales figure has gone drastically up or down from one year to the next or are hugely different to the industry average, they will look into why this is.

The letter from HMRC will normally have clues on it as to why you are being investigated. It will also detail what direction the investigation will be taking. When you receive this letter, the emphasis is to act fast as if you do not have all the required information ready and at hand when the investigation starts, you will be seen as unorganised.

HMRC have the ability to request information from third-parties such as banks and other businesses. This is the extreme as normally they will look for co-operation, from the person being investigated, which will not only speed the whole process, but reduce any fines or penalties incurred. This can be just allowing them access to your files or it could be letting them interview you for a day. If you have made clear and obvious mistakes but do not allow HMRC access to your documents, the fine can be doubled, making it much worse for you.

The effect of not co-operating on your business is as follows:

1. The cost of the fine; which has no limit.
2. The cost of lost business and income whilst the investigation is going on. You could even be called for a police-style interview for a few days.
3. The bad publicity of tax evasion being hung over your business. This could lose potential and current suppliers or clients.
4. You will find it harder to get loans or funding from external sources. This is seen as deliberate avoidance of payment which is not the type of business they want to give a loan to. If you struggle to pay the fine, it can affect your credit rating too.

The general trend is that it is at this stage people will go and ask for professional help. The best people to see are tax accountants such as Tax Affinity Accountants who can help in various ways with the investigation. Some are below:

• Prepare you for the situation likely to be faced. Tax Accountants have gone through this process before and have seen clients both be let off and be found culpable. Tax Accountants are able to give advice on what type of thing you should say, how the investigation will pan out and what will happen if you get called for an interview. If this happens, you can be “warmed up” with some questions that HMRC will ask you and warned of the potentially probing questions they could ask to try and get what they want to hear from you.
• Collating information relevant to the investigation and ensuring only relevant information is provided to HMRC. This is where it is better to be using a Tax Accountancy firm already for your returns and accounts as they can provide you with all the information related to your investigation. Some people try to take everything they have (including receipts from shops and payslips) to investigations which are simply not needed. If you take everything, it can often dilute your argument as you are trying to argue over small details and take a long time trying to find the document in question.
• Dealing with any request by HMRC for further information. Sometimes HMRC will require more information for their investigation. However, sometimes this is a trick to try and get you to admit to what you did wrong or what you are covering up. A Tax Accountant will be able to distinguish between what is a genuine request and what is a ploy. They will also be able to provide a rapid turnaround for any information required by HMRC as all terms and requests will be understood rather than potentially misinterpreted by someone on their own making the situation look more suspicious or that they are not co-operating.
• Keeping the investigation to the point. Similar to the above, sometimes HMRC will see if there are any leads to other investigations they could do during this time. They might try to test other things which might not be picked up on by a person doing it alone. A Tax Accountant will make sure HMRC are only investigating what they said in their initial investigation letter.
• Negotiations with HMRC regarding penalties and potential interest. A Tax Accountant is in a better position to try and negotiate with HMRC over any penalty or fine imposed. People trying this on their own often get confused by the complicated HMRC phone system so end up at the wrong person.
• Creating a mutually beneficial pay arrangement between the parties. If a fine is levied against the business, if it is too large to pay at once, or if the business has a poor cash flow position at that date, a Tax Accountant can act as a third-party to try and create a suitable payment plan. This can often avoid the interest charges that HMRC try adding to the fine.

Even when the investigation has finished, there is no guarantee that you will not be investigated again. If you were randomly investigated one year and then the next year your profit figure increased dramatically, you could well actually be at risk of being investigated again. HMRC will not take to kindly either if you have already been found to be responsible in a previous investigation and then continue to make mistakes in subsequent years.

This blog might seem all doom and gloom but regulations are in place for the amount of tax that should be paid by either businesses or individuals. HMRC just apply this regulation as it would be unfair for some people to get away with not paying enough tax. If you have done nothing wrong, or even make an innocent mistake, HMRC will not be aggressive or disruptive. If you co-operative with them, they will ensure the investigation is as pain free for you as possible.

A Tax Accountant’s expertise and experience will help you greatly both financially and emotionally. As the fees that you may have to pay will be far outweighed by the amount of tax saved in direct negotiations with HMRC.

They know what the situation is and what the next move by HMRC will probably be. This means that anything unusual going on by HMRC will be noticed and prevents you from submitting too much information or making the investigation drag on longer than it should. The key is to co-operate with both your Tax Accountant and HMRC so the investigation is over quickly and as

Sole Trader v Limited Company

A difficult question that the self-employed face is whether to trade as a sole trader/partnership or to trade as a limited company. However, the answer isn’t definitive and is dependent on many factors ranging from the type of business you are running to the type of person you are. Whichever one you choose has different implications for tax, legal and financial responsibilities. The aim of this article is to give you an insight to the advantages and disadvantages in terms of tax purposes of being a sole trader/in a partnership or forming your own limited company. Hopefully it will inform you on the structure most beneficial to you.  

Legality

As a sole trader, you are the business. You have full control and ownership of the business and are able to manage it in any way you like. On the contrary, a limited company is its own legal entity. Instead you serve the company as a director of the company and act as a shareholder. In most cases, you are considered as an employee but this status is not automatically granted in terms of Employment Law, the National Minimum Wage or for Tax Credits.

Tax – Sole Trader

You are subject to income tax on the taxable profits of your business. For the tax year 2013/14, you pay 20% tax on income between £0 - £32,010 and 40% tax on income between £32,010 - £150,000. Income above £150,000 is taxed at 45%. The personal allowance amount for persons aged under 65 is £9,440. You are also required to pay Class 2 & 4 National Insurance contributions (NIC). Class 2 NIC are at a flat rate of £2.70 per week. However, you may not need to pay Class 2 NIC if your earnings are below £5,725 for the whole year. Visit http://www.hmrc.gov.uk/working/intro/class2.htm to see if you may be exempt from paying Class 2 NIC.  Class 4 NIC is calculated based on your profits for the year. For 2013/14, you pay 9% on annual profits between £7,755 and £41,450 and then 2% on any amount over that.  Any trading losses you incur on your business can be offset against other your income to reduce your tax liabilities.

Tax – Limited Company

For a limited company, it pays corporation tax on its taxable profits. Company tax rates are lower than the higher rates of income tax. If you are employed under your company and taking a salary, your earnings from that employment are subject to income tax and Class 1 NIC  due through PAYE (Pay As You Earn). The amount you pay is dependent on your earnings. Shareholders of the company who are on a higher tax bracket may have to pay higher a higher tax rate on any dividend income they receive.  Losses from the company can only be offset against its other income but not against your income as an individual.

What does it all mean?

Now for most people, the above two paragraphs may have been not only been of little help but confused you further. Here is a scenario that will make things easier to understand and hopefully give you enough information to aid you in that important decision.

You have a trading income of £16,000 pre tax and wish to extract all the profits for yourself. As a sole trader, you will be taxed at 20% for any income in excess of your personal allowance. The total tax liability including the Class 2 & 4 NIC amounts approximately to £2,181 (assuming 48 weeks and available personal allowance of £9,440). The tax calculation for a limited company is slightly more complex as you have more flexibility in how you distribute the income. For simplicity sake, you take the minimum annual wage that is not liable for PAYE tax or NIC which is around £7,000.  Company profits under £300,000 are taxed at a rate of 20%. Taxable profits is £9,000 and amounts to a corporation tax liability of £1,800. This leaves £7,200 to be distributed as dividend which is taxed at 10% for income below the earnings threshold of £32,010. The total tax paid equates to £2,520. In this scenario, it is marginally better to see that remaining as a sole trader is more beneficial as you pay much less tax. However, calculations may differ depending on the trading income and how much salary you take. The general idea is that as your trading income increases, its becomes more and more beneficial to trade as a limited company than as a sole trader (40% income tax versus 20% corporation tax).

Just a Final Note

You are better off trading as a sole trader for tax purposes if your annual trading profits are not high. However, many businesses opt to form limited companies for reasons that extend past tax issues. Should the business fail, you will not be personally liable for its debts if you were a limited company. If you plan to sell the business after a few year then limited is again a better choicAlso if you plan to expand the business then getting finance for your business may be easier if you were a limited company. There are many varying circumstances that makes being one more appealing than the other but if you still appear unsure then just contact us and we’ll be sure to offer you tailored expert advice to aid your decision.

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered in the Finance Industry to be the small business experts. Helping and supporting business throughout the UK, they regularly help new and established businesses with valuable support.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.  

BUDGET 2014 HIGHLIGHTS

PERSONAL ALLOWANCE
The personal allowance is the amount of income you can receive each year without having to pay tax on it. This amount is to increase to £10,000 for 2014/15  and to £10,500 for 2015/16. The basic rate taxpayer will see a saving of about £112 in 2014-15 and a further £100 in 2015-16 on their annual income tax bill.

HIGHER RATE TAX PAYERS
The threshold for which individuals pay tax at the higher rate of 40% will increase by 1% for both tax years.

ANNUAL INVESTMENT ALLOWANCE
For businesses, the annual investment allowance will increase from £250,000 to £500,000 until 31 December 2015.

HIGHER ANNUAL SUBSCRIPTION LIMIT FOR INDIVIDUAL SAVINGS ACCOUNTS FROM 1 JULY 2014
The chancellor has announced big changes to the Individual Savings Accounts (ISA). The new policy means that, from July onwards, it will be possible to save up to £15,000 in total. Furthermore, the whole sum could be in cash unlike before where only half of the limit could be saved in cash and the rest in shares. Also, the 10p tax rate for savers will be abolished.

CLASS 2 NIC
From April 2016, Class 2 National Insurance Contributions (NIC) will be collected through self-assessment.

CHILD-CARE HELP
Parents paying 80% of childcare costs of up to £10,000 per child, aged up to 12, to a registered provider will get the remaining 20% tax-free from September 2015.

NEW TRANSFERABLE TAX ALLOWANCE
From April 2015, there will be an introduction to a new transferable tax allowance for married couples and civil partners.

PENSION CHANGES
All tax restrictions on pensioners' access to their pension pots to be removed, ending the requirement to buy an annuity. The taxable part of pension pot taken as cash on retirement to be charged at normal income tax rate, down from 55%. There is an increase in total pension savings people can take as a lump sum to £30,000

By Wilson Law at Tax Affinity Accountants

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they are considered to be small business experts helping and supporting business in the UK. They regularly help new business start up and provide valuable support for new businesses.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Personal Tax Return Deadline Approaches

Completing a personal tax return can be a stressful, complex task and an unwanted hassle for self assessment taxpayers. At Tax Affinity we provide a simple, price competitive service to alleviate your concerns over personal tax returns.

If you currently complete your own tax return then you could certainly benefit from our services to ensure that you don’t overpay on tax. Mistakes on your tax return could cost you a significant amount and it is therefore worth taking advantage of expert advice to make sure you report the correct level of taxable income. We will assess all of your income and expenses information to ensure you minimise your tax liability.

If you are already taking advantage of our tax help, please ensure you send us all your income and expenses information (bank statements, invoices and receipts) for the period 6th April 2012- 5th April 2013 as soon as possible. With the busy Christmas and New Year period approaching, it is vital that we receive all this information in the next 3-4 weeks so we can ensure all of our clients’ tax returns are submitted before the deadline.

By leaving your tax return right up until the last minute you risk incurring a late filing penalty. Here is a summary of the HMRC penalty charges you may face:

Length of Delay - Penalty incurred

1 day late

A penalty charge of £100 even if you have no tax liability for the year or have paid the tax you owe

3 months late

A penalty charge of £10 per day up to a maximum of 90 days- £900. This is on top of the initial £100 charge.

6 months late

£300 or 5% of the tax due (whichever is higher). On top of the penalties listed above

12 months late

An additional £300 or 5% of tax due. However, in certain cases the charge may be up to 100% of the tax due or higher.

Please avoid any of these penalties by sending us all your information as soon as possible. Feel free to pop into the office or just email us the necessary documents. Rushing a tax return can result in a number of unnecessary errors so please ensure you get on top of the situation in the coming weeks.

By Tom Hoadley at Tax Affinity.

Tax Affinity Accountants are experts in Tax and Accountancy. Based in Kingston upon Thames they regularly submit tax returns for their clients peace of mind, providing a great value for money service for people from all walks of life.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Properties have always been a relatively safe and sound option for investment. As a landlord, renting out your property can offer an alternative source of income in the form of rent and potentially give a good return on the initial investment through capital appreciation. However, if you’re looking for huge returns over a few days then property investment is unlikely to be your preferred choice. Nonetheless properties have historically been a low risk investment and have provided modest returns over the long term. Here are a few things to consider if you wish to maximise your rental income:

Deducting Allowable Expenses

You can reduce the amount of rental income that is taxable by taking advantage deducting allowable expenses. There more common expenses you can deduct are:

• Utility Bills and Council Tax
• Maintenance and repairs to the property (excluding additions and improvements)
• Interest on the mortgage to buy the property
• Cost of labour/services (Wages for cleaners, gardeners etc.)
• Letting Agent’s Fees
• Accountancy Fees
• Service Charges
• Direct Costs (Advertisement cost, fuel costs incurred in the journey to the property, phone calls etc.)
• Contents Insurance

The costs should be wholly and exclusively incurred as a result of renting out the property. If a part of the expense meets this condition then that part can be deducted from income.

Cost comparisons

Saving costs can only have a positive effect as expenses are the only thing eating into your rental income. Try reviewing your costs on an occasional basis (once a quarter) and you may witness bargains that could help you save a lot of money. Service providers tend to offer sizeable discounts to new customers but only have stagnant prices for existing customers. Getting quotes from different companies that offer the same service can sometimes amaze you at how wide the price range can be. Just be sure you don’t jeopardise the quality of services just to save a few pennies.

Annual Investment Allowance

Expenses of a capital nature are not deductible. You cannot deduct from income the cost of the property you are renting out, expenditure that adds to or improves the property or the cost of renovating a property from a state that cannot be rented out.

However, capital spending can be deducted using the Annual Investment Allowance. From 1st January 2013 (until 1st January 2015), you can deduct up to £250,000 a year for many types of capital spending using the Annual Investment Allowance, such as commercial vehicles, business furniture, computers, machinery and tools. It would be beneficial to take advantage of the temporary rise in the Annual Investment Allowance as it is likely to revert back to around the limit of 2012/13 (£25,000) after January 2015.

Landlord’s Energy Savings Allowance (LESA)

Until April 2015, an allowance of up to £1,500 per let residential property can be claimed for the cost of loft, wall and floor insulation, draft proofing and hot water system insulation. The LESA was introduced to encourage landlords to improve the energy efficiency of let residential properties. These expenditures are usually not deductible from taxable income and are not eligible for capital allowances.

Wear and Tear Allowance or Renewals Allowance

For fully furnished properties, a wear and tear allowance can be claimed for furnishings such as beds, carpets and appliances. The allowance is 10% of the net rental income (gross rent minus utility bills, service charges and council tax) you receive from these properties.

With the renewals allowance, you can claim expenses of any furniture as you replace them. Any money you make from the disposal of the asset must be deducted and the cost of any improvements (e.g. an upgrade from a washing machine to a washer-dryer)

Note that you can only claim either the Wear and Tear Allowance or the Renewals Allowance but not both.

By Wilson Law at Tax Affinity.

Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Tips to avoid paying too much tax if you’re self employed

According to Which.co.uk, we paid an estimate of £12.6 billion in unnecessary tax in 2012. People who are self-employed or have their own businesses are particularly prone to overpaying tax. But by doing a bit of research and accessing your tax options, you can maximise your income and safeguard your finances for the future.

Spreading income tax payments among the family

Every individual that is able to work has a personal allowance of £9,440 for the financial year 2013/14. If you are earning over the 20% rate band for income tax, it may be wise to employ a family member to share a part of your workload. Income up to £9,440 would be free of income tax for him or her, and an allowable expense for you. This is especially ideal for any children you have over 16 that can work over the holidays as their wages are also tax deductible. Furthermore, no national insurance is payable if they earn less than £149 per week. Additionally, members earning between £109-148 are entitled to certain state benefits such as building towards the state pension.

Using the personal allowance to its maximum

Rather than one individual holding the bulk of the income and facing a higher rate of income tax, it is of best interest to arrange the finances in a way that lessens the tax burden. This can be achieved by building up a state pension for your partner and/or make pension payments to build up a retirement pot. These contributions are tax relievable at the marginal rate of the payer. On a further note, £3,600 can be contributed per year irrespective of earnings so consider pensioning for any of your children helping out at the business.

Taking advantage of tax free opportunities

Use up you and your partner’s cash ISA limit of £5,760. Gift any surplus funds to your partner if he/she is a lower tax payer than you. Be careful of the liquidity position of the business, it may be troubling to recall back the funds.

The £100,000 ceiling

Try not to exceed earnings of £100,000. For every £2 of income over £100,000, your personal allowance falls by £1. This means that at an income of £118,880 you will have lost all your personal allowance of £9,440. The £9,440 is then taxed at a rate of 20%, and the £18,800 over £100,000 is taxed at a rate of 40%, meaning that your marginal rate of tax on this slice of income is a whopping 60%. You can consider increasing your pension contribution to preserve your personal allowance. Note that the maximum annual allowance is £50,000 but you can use any unused annual allowances dating back three tax years to increase your contribution.

Maximising your tax allowances

Each person has an annual capital gains tax allowance that can be reached before the gain is taxed. This figure amounts to £10,900 for the financial tax year 2013/2014. With sound financial planning, you can get up to £20,340 tax free each year (£9,440 for personal allowance and £10,900 for Capital Gains Tax).

Be well organised and keep good records

The deadline for the online tax return is 31st January (31st October for the paper tax return). Failure to commit to the deadline may result in penalties. Keeping your records in an organised manner can make your life a lot easier especially if HMRC decides to investigate. 


Plan ahead

Good forward financial planning can maximise successful tax strategies. That’s why at Tax Affinity Accountants we make sure to sit with all our clients and run through the options for good financial planning.

By Wilson Law

Tax Affinity Accountants are considered in the market to be experts in Tax and Accountancy in the UK. Based in Kingston upon Thames they have clients right across the UK as well as Europe, Middle East and North America.

For more information visit www.taxaffinity.com. To read more interesting articles like this visit www.taxaffinity.com/blog. Please feel free to comment and share this with your friends.

Its a question we often get asked - How do you appeal a tax penalty?If you've been unlucky enough that HM Revenue & Customs (HMRC) have imposed a tax penalty on you, a taxpayer then you or your appointed agent (usually accountant) are allowed to lodge an appeal against the penalty.

But the crucial thing is knowing that the grounds upon which to make the appeal will depend on the nature of the penalty and its circumstances.

Example:

A penalty for late filing of a tax return can be appealed on the grounds that the tax payer had a fair and reasonable excuse for having to file the tax return late. A sample of some of the reasons that are valid are as per below.

• There was no tax return actually due
• No notice to file a tax return was ever received by the tax payer
• If the taxpayer was ill, or had an accident, or something happened in the family
• A HMRC employee gave the wrong advice about the filing deadlines or filing online
• For direct taxes, if a taxpayer relies on third party who did not file the return this could be a valid excuse
  
• The taxpayer had posted a return on time and it got delayed or lost in the post
  
• If a taxpayer thought that the online filing system had worked and it later turned out that it did not eg Internet or website failure.

Tax related penalties for errors in tax returns and important tax related documents causing an undervaluing of tax, or over claiming of an income related loss or allowable tax relief can also be appealed on the grounds that the taxpayer tried to take all reasonable care and that:

• The error caused was by a third independent party (including HMRC), and it was reasonable and fair that the taxpayer placed his/her total reliance on that third party
• Accidental error i.e. the mistake was a one off and should be suspended because the taxpayer had tried to take all reasonable care over his/her tax affairs
• If the penalty is deemed unfair and excessive, or miscalculed in some way which does not allow for the correct decrease of the amount in law
  
• And if the penalty should be reduced to 0% because the taxpayer had taken all reasonable care as far as they could.

If a penalty letter or notice is received. You should never ignore it but try to follow the instructions with the letter and if no instructions are with the letter then call HMRC and ask how you may make an appeal. You can also write to HMRC, and make a written appeal. But don't ignore it hoping it will go away, because it won't.

And try to remember, while HMRC seem quick to apply penalties they are also fair to review them and normally always offer an opportunity to review all penalty decisions. But if the penalty still applies following the review, the tax payer shouldn't lose heart and can always make an appeal to the First Tier Tax Tribunal, if they feel that their appeal is truly justified.

Making an appeal in a Tribunal.

Normally this will involve the preparation of 'trail bundle' which is basically a pack of documents that contain copies of all papers that the defendant is going to be relying on in the case and they have to be disclosed together with, if appropriate and possible, any legal case law that applies.

Papers:

The bundle may contain different stuff and it usually depends on the nature of the case, e.g. if a taxpayer is appealing a late filing penalty because he was ill and unable to submit the return, then he possibly needs only to bring a doctor's official certificate or hospital and medical records showing this to be the case.

While in the course of an appeal a taxpayer or their appointed representative will be required to present their case and then present their evidence to the Tribunal, calling any persons as witnesses if they feel it will help their case.

Evidence:

Simply like all legal cases the quality of evidence is whats important. Each party in the case will have a keen interest to expose the other party's and their evidence or witnesses as an untrue or unreliable to base the decision on. The judge will decide based on these presentations.

In some cases an appeal can be lodged to the Upper Tax Tribunal if it is felt that the First Tier Tribunal decision was incorrect. In most cases however it never gets to this point as the vast majority of appeals are handled by HMRC themselves at the earliest stage.

Tax Affinity Accountants are experts in Tax and Accounting for businesses and individuals. Based in Kingston upon Thames they cover the whole of the London area with many satisfied clients. If you have any tax appeal requirements please feel to call or visit our website at www.taxaffinity.com.

Follow us on twitter @tax_affinity to find more useful hints and tips.

Still wondering about what the key things to come out of the Chancellor's budget were for you and your business? - Well read on...

Income tax

The threshold at which people start paying income tax is to be raised to £10,000 in 2014 - a year early - an increase in the threshold of £560.

State of the nation

The Office for Budget Responsibility (OBR) has forecast growth of 0.6% this year, half of what it said it would be in December. But the OBR predicts the UK will escape recession this year.

After that, growth is predicted to be 1.8% in 2014; 2.3% in 2015; 2.7% in 2016 and 2.8% in 2017.

Home-hunters

Home buyers wishing to buy a new home worth less than £600,000 are to be given assistance. As long as they have a 5% deposit, the government will stump up an extra 20% - repayable when the house is sold.

Help for business

Chancellor George Osborne announced that corporation tax will be cut by 1% to 20% in April 2015. 

This, Osborne said, will make the UK's corporation tax the lowest of any major economy in the world. The UK, he added, is "open for business".

Elsewhere, the Chancellor said some 450,000 small firms will pay no employer National Insurance.

Osborne also said stamp duty on AIM shares will be abolished from next April, in a move which he said will benefit hundreds of small business in the UK.

The government will give capital gains tax (CGT) relief on sales of businesses to their employees.

Youngsters

The government confirmed it will consult on options for transferring savings held in child trust funds (CTFs) into Junior ISAs.

The move will offer a lifeline to six million children.

Junior ISAs were introduced in November 2011 as an attempt to encourage saving for children, following on from the abolition of CTFs at the beginning of that year.

Tax avoidance

The Isle of Man, Guernsey and Jersey are to enter tax information exchanges with the UK that will significantly increase the amount of information automatically exchanged on potentially taxable income, in order to identify and tackle evasion. The move aims to recoup £3bn in unpaid taxes.

Additionally, the government will remove the presumption of self-
employment for limited liability partnership (LLP) partners, to tackle the disguising of employment relationships through LLPs and counter the artificial allocation of profits to partners (in both LLPs and other partnerships) to achieve a tax advantage.

The measures, the government forecasts, will in total raise over £4.6bn in new revenue over the next five years.

Pensioners

As previously announced, the single flat-rate pension of £144 a week is to be brought forward a year to 2016. This will end contracting out of the State Second Pension, so that everyone will pay the same rate of national insurance contributions and build up access to the same single-tier State Pension

Cap on social care costs confirmed at £72,000.

The government has also pledged to make £5,000 ex-gratia payments to Equitable Life policyholders who were too old to be eligible for compensation payouts. The government is not obliged to do it, Osborne pointedly said, but it is "the right thing to do".

Borrowing

Borrowing will be £114bn this year and is set to fall to £108bn, £97bn and £87bn in following years. The deficit has been cut by a third since May 2010.

Borrowing as share of GDP is to fall from 7.4% in 2013-14 to 5% in 2015-16.

Debt as a share of GDP will increase from 75.9% in 2012-13 to 85.1% in 2015-16.

Inflation

The 2% Bank of England target is to stay in place, the Chancellor said, though its remit is to be changed to focus on growth as well as inflation.

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