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.
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. No one in the UK likes paying the taxman. So here's how to pay less tax!
Research by professionals claim we’ll collectively gift the taxman £12.6 billion, or £421 per taxpayer, this year. Tax Action reports highlight ten examples of tax wastage, either benefits we’re not claiming or tax breaks we’re not using. Some of the biggest area of wastage in the report highlight income-related tax credits, which include Child Tax Credits, Working Tax Credits and Pension Credits. The public's failing to take advantage of the tax relief available on pension contributions is the second biggest waste, with not using tax relief on charity donations third. Here are the top ten list of biggest tax wastes: List of Tax wastage and their amount of wastage: Income-related Tax Credits: £7.26 billion Tax relief on pension contributions: £2.45 billion Tax relief on charity donations: £997 million Savings on Inheritance Tax: £448 million Making use of ISAs: £403 million Child Benefit: £401 million Avoiding penalties for late filing of tax return: £307 million Savings on Capital Gains Tax: £133 million Making use of Employee Share Schemes: £118 million Income tax and Personal Allowances: £83 million Total: £12.6 billion Source: unbiased.co.uk So it should become clear where you’re paying tax unnecessarily, So to help we at Tac Affinity Accountants are going to show you six ways you can stop wasting your money and pay less tax. 1. ISA Have an ISA One problem with saving money in a standard savings account is that you have to pay tax on any interest you earn on those savings. And with interest rates so low on many savings accounts right now, this really is the last thing we all need. Related how-to guide Cut your tax bill by thousands Tax may be an inevitable fact of life, but there’s no reason to pay more than you have to! So to avoid this, make sure you invest in an ISA. This is a tax-free way of saving and you can invest up to £10,680 in an ISA each tax year. You can invest the full amount in a stocks and shares ISA, or you can split your investment between a cash ISA (up to £5,430) and a stocks and shares ISA. You can also stash tax-free cash for your children by opening a Junior ISA (up to £3,600 during the current tax year) or by saving into an existing Child Trust Fund (the savings limit on these have now been raised to £3,600 a year in line with the Junior ISA limit). We took a look at the top Junior ISAs on the market at the moment inthe article Your child could earn 6% from an ISA. Or you could consider starting a pension for them. Find out more about all these tax-efficient savings options for children in Top tax havens for babies, children and teens. 2. Pension. By using a pension to save for retirement, you’ll also avoid paying tax. That’s because your pension contributions qualify for tax relief. So if you’re a basic rate taxpayer, you’ll qualify for tax relief at a rate of 20%. Meanwhile, higher rate taxpayers qualify for tax relief at a rate of 40% and additional rate taxpayers will get 50%. So pensions are a great way to build up a tax-free nest egg for your retirement. That said, once you start to claim your pension income, you will have to pay income tax. You should note that the amount you can contribute to your pension is now limited to £50,000 a year. 3. Partner If you’re a taxpayer, but your partner isn’t, a great way to save tax is to transfer any income producing assets to his/her name and receive the lower tax rate by using his/her personal allowance. Your personal allowance is the amount of money you can earn before having to pay tax. The list below shows the personal allowance for the current tax year and next: Personal allowances Personal allowance 2011/2012: £7,475 2012/2013: £8,105 Allowance for those aged 65-74 2011/2012: £9,940 2012/2013: £10,500 Allowance for those aged 75+ 2011/2012: £10,090 2012/2013: £10,660 4. Tax Code Your employer uses a tax code to calculate how much tax should be deducted from your pay. But how many of us actually bother to check our tax code to see if it’s correct? Your tax code is made up of a few numbers and a letter. If you multiply the numbers as a whole by ten, that’s how much money you can earn before you start paying tax. The most common number is 747, as for most people it’s only once you earn more than £7,475 that you start paying tax. Meanwhile, the letter refers to your tax status and how that affects the preceding number. The most common letter is L, meaning you qualify for the basic personal allowance. If you check your tax code and you think there’s been a mistake, you need to contact your tax office. In some cases you can claim up to £1,300 of your tax back. 5. Give it away In each tax year, you can gift up to £250 to as many people as you like, completely free of inheritance tax. Just bear in mind you can’t give a larger sum of money and claim exemption for the first £250. You can also give away £3,000 in total each tax year and if you don’t use your full allowance, you can carry it over into the next tax year. However, you can’t combine this £3,000 allowance with a £250 gift to the same person. Wedding or civil partnership ceremony gifts are also exempt from inheritance tax – although there are limits to this:
Gifts to UK charities are also tax-free. So its worth finding out how to cut your tax bill without the effort of complex tax planning. 6. Capital Gains Tax allowance Each of us has a yearly capital gains tax (CGT) allowance (£10,600 in 2011/2012), so only gains above this band will be liable to CGT. In other words, each of us can make profits of £10,600 each tax year from selling assets or investments before we have to pay tax. Any profits made above this level will be subject to tax at 18%, or 28% if you’re a higher-rate taxpayer. So each year, before the tax year end, consider selling assets to use up your allowance and make a tax-free profit. It’s a good idea to spread this over a couple of years to make the most of your allowance. For example, if you sold some shares today and then more on 6 April 2012, you’d be able to take advantage of two years’ CGT allowances totalling £21,200. Don’t forget that children also have a CGT allowance of £10,600, so if they hold an investment they can make tax-free profits up to this level each tax year. Tax Affinity Accountants are experts in tax and accounting. For more interesting articles and help visit www.taxaffinity.com. Please feel free to comment and share this with your friends. Buy-to-let properties have attracted thousands of investors. But before you take the plunge, it's important to consider the tax implications.
Taxes on buy-to-let properties: Britain's landlords are required to pay tax on rent and capital gains tax, but there are ways to minimise this. Rental Income Rent income will be treated as income and taxed in line with your basic or higher-rate tax bands. You can, however, be able to offset mortgage interest payments, letting agency costs and maintenance expenses against the taxable rental income. This can make it more tax-efficient to have a mortgage on your investment property rather than your main home where you can no longer get tax relief on your mortgage. Rental incomes should be declared on an annual self-assessment tax return, it may be worth seeking an accountant to ensure all tax breaks are taken advantage of. Tax on the property price rise Capital Gains Tax (CGT) comes in when you sell a buy-to-let property at a profit. From April 2008, capital gains tax was changed to a flat rate of 18%. Any gains above the annaul £10,100 (2009/20) personal threshold will attract CGT. Before CGT as charged at up to 40% and taper relief cut this, if a property had been owned for more than three years. This no longer applies. Capital gains tax applies to any property which is not your main home, known as the Principal Private Residence. If you only have one property and it is considered your PPR, then you do not have to pay CGT, however, the taxman may want evidence that you were actually living there. CGT liabilities should be declared annually on your tax return and anyone making a substantial sum from selling a property should seek out a good accountant, who can take advantage of all available breaks. Stamp duties Stamp duty tax is payable on buy-to-let properties by the purchaser, as all other residential properties. The current rates are 1% above £125,000, 3% above £250,000 and 4% above £500,000. A stamp duty holiday currently applies until the end of the year on all properties under £175,000. Decreasing tax Most people think that one way to dodge tax - and are often advised by accountants - is to put a second home in the name of their partner. When they come to sell, they claim their partner has been living in the property thereby making it exempt from CGT. This choice is easier for people who have done let-to-buy: they keep the mortgage on the first home which they lived in - and then take a second traditional mortgage with another lender on an additional home where they live. In this way you can bypass the need for a proper buy-to-let mortgage on the first property, which would alert the taxman. However, it breaches the lender's rules, which means they could call in the loan without notice. More importantly, evading CGT in this way would be treated as illegal and result in fines or even imprisonment. However, there are more complicated ways of mitigating tax on buy-to-let, including setting up a company to own the properties. For the average amateur investor this is not worthwhile as it is expensive, complicated and can limit access to mortgage finance. Cutting down on capital gains tax Typically, buy-to-let owners and those with second homes can slash tax bills if they have ever lived there as their principal private residence and through lettings relief And everyone's main home - or principal private residence as the taxman catchily names it - is exempt from capital gains tax when sold, but any other properties they own attract CGT at their highest rate when sold. For example - an unmarried couple may each own a home that qualifies as their principal residence but a married couple may only nominate one property and must elect jointly. And it is possible to cut capital gains bills by living in the second property for a period of time. Special rules apply to properties that have been a main residence. The period when it was the main residence is exempt, plus the last 36 months of ownership. As for those who have previously rented out their main residences there is the added benefit of being able to claim up to £40,000 letting relief. This is available to anyone with a share in the property - giving a couple, even if married, up to £80,000 between them. Finally, the amount of private letting relief that can be claimed cannot be greater than £40,000 and must be the lower of that sum, the amount of principal private residence relief being claimed, or the capital gains made during the letting period. The best advice however that the wisest of investors make sure to have is to use a clever tax accountant to handle your affairs. The tax saved will be much greater than the fees they will ever charge. Tax Affinity Accountants based in Kingston Upon Thames, are experts in tax and accounting. Visit www.taxaffinity.com for more interesting articles. Please feel free to comment and share this article with your friends. The Treasury expects to raise over £4 billion from Capital Gains Tax (CGT) from the last tax year - 15% more than the previous year. In our view the main reason for this rise is the number of investors paying CGT at a higher rate has increased.
CGT is payable at 18% if you're a non-taxpayer or basic rate taxpayer, or 28% if you're a higher or additional rate taxpayer. Remember, CGT is payable when you realise profits in excess of the annual allowance (£10,600 in the current tax year). One of the simplest way to protect your investments from any future CGT liabilities is to shelter them with an ISA. Once held with an ISA there is no further tax to pay on any investment income, and no tax to pay on gains. Each tax year you have an ISA allowance. If the allowance is used every year it offers the opportunity to build a significant portfolio of tax sheltered assets in the long run. This year the ISA allowance has risen to £11,280, that means a couple could shelter as much as £22,560 in ISAs. Tax benefits of Stocks & Shares ISAs For those who already hold investments showing substantial gains there are some simple steps you can take to reduce, or even eliminate completely, any CGT liability. Please note tax rules are subject to change, and the benefits of tax shelters will depend on your circumstances. 1. Offset losses against your gains If you sell an investment and make a loss, the loss can be offset against any gains you have made in the same tax year. If your losses exceed your gains, you can register the losses on your tax return to offset against future gains. 2. Sell when you pay tax at a lower rate The rate of capital gains tax is based on the rate of income tax you pay so your CGT bill will be lower if you realise gains when your income is lower. If you know your taxable income will fall in the future, perhaps due to retirement, you could consider delaying selling until then. However you should always look at your investment objectives and merits first and look at the tax benefits as an added bonus. 3. Transfer to your spouse and pay less tax You can normally transfer investments between spouses without an immediate tax charge. This means a married couple (or those in a registered civil partnership) can use both their annual allowances to make gains of £21,200 this tax year without paying CGT. If your spouse pays tax at a lower rate than you, you could transfer the investments into their name before selling to benefit from CGT at the lower rate. 4. Reduce your taxable income Because the rate of capital gains tax you pay is linked again to the rate of income tax you pay, reducing your taxable income could reduce the amount of capital gains tax you pay. The easiest way to do this is through tax shelters such as ISAs - income from an ISA is free from further tax. In some cases you might be able to reduce your taxable income for a particular year - perhaps by transferring income-bearing assets such as cash deposits, to your spouse. 5. Use your pension to reduce capital gains tax A pension contribution can also be used to reduce capital gains tax liability for many investors by taking advantage of the tax relief on the contribution. Effectively your basic rate tax band is increased by the amount of the pension contribution, meaning larger gains might be realised before the higher rate of capital gains tax is payable. For example, a pension contribution of £3,600 will extend your basic rate tax band from £42,475 to £46,075. Providing your taxable income and gains are less than £46,075 in this tax year, you will pay capital gains tax at 18% and none at 28%. Find out more about Capital Gains Tax and how Tax Affinity Accountants can help you visit our website and arrange an a free initial consultation. Please remember all stock market investments can fall as well as rise in value so you could get back less than you invest . Tax Affinity Accountants based in Kingston upon Thames are experts in advising the public in all matters to do with tax and accounting. In the current economic climate everyone should be looking for ways to save tax. And to help, we at Tax Affinity Accountants have compiled a list to do just that.
The tax codes, allowances and deadlines 1. Tax code Check your tax code each year (the numbers and letters on your payslip). If you're on the wrong code, you may be paying too much tax. 2. Capital gains tax allowance Remember that capital gains under £10,600 are tax-free. Married couples and civil partners who own assets jointly can claim a double allowance of £21,200. CGT is charged at 18% if you are a standard rate taxpayer, and 28% if you pay tax at a higher rate. 3. Tax return deadlines Don’t miss the 31 October deadline if you want to make a paper tax return. You can do your tax online up to 31 January, but paper tax returns need to be in three months earlier than online tax returns to avoid a £100 fine. 4. Annual investment allowance If you are a landlord or run your own business, take advantage of the annual investment allowance (AIA) to claim for capital expenditure on items such as tools and computers. You can claim relief on up to £25,000 a year. How to pay less tax if you're self-employed 5. Tax-deductible expenses If you’re self-employed, don’t forget to claim all your tax-deductible expenses, including cash expenditure where eligible. 6. Self-employed car costs If you're self employed, you can claim the running costs of a car, but not the cost of buying one. If you use the same car privately, you can claim a proportion of the total costs. 7. Cash-flow boost for self-employed If you are setting up as self employed, you may be able to improve your cashflow by choosing an accounting year that ends early in the tax year. This maximises the delay between earning your profits and your final tax demand. 8. Annual losses If you are self employed, you can carry forward losses from one year and offset them against profits from the next. See our page on when the self-employed pay tax for more. 9. Payments on account If you are self-employed and expect to earn less in 2012-13 than you did the year before, apply to reduce any payments on account that HMRC ask you to make. Saving tax on property income 10. Rent a room Rent a room relief is an optional scheme that lets you receive up to £4,250 in rent each year from a lodger, tax-free. This only applies if you rent out furnished accommodation in your own home. 11. Landlord's energy-saving allowance If you rent out property you can claim special tax allowance of up to £1,500 for insulation, draught proofing and installing a hot water system. 12. Landlord's expenses If you rent out property, you can deduct a range of costs before declaring your taxable income. These include the wages of gardeners and cleaners, and letting agency fees. 13. Tax relief on your mortgage You can claim tax relief on the interest on a mortgage you take out to buy a rental property – even if it the rental property is abroad. 14. Reduce capital gains tax (CGT) on a rental property Landlords are normally liable for CGT when they sell a rental property. If it has been your main home at some time in the past, you can claim tax relief for the last three years of ownership. Pay less tax on savings and investments 15. Isa allowance Use your tax-free Isa allowance. This year, the overall limit is £10,680, of which £5,340 can be put into in a cash Isa. 16. No CGT on shares held in an Isa There is no capital gains tax to pay when you sell shares or units held in an Isa. For more details see Tax on savings and investments. 17. Junior Isas Use Junior Isas or Children’s Bonus Bonds to avoid being taxed on gifts you make to your own children. 18. Transfer assets Transfer savings and investments to your husband, wife or civil partner if they pay a lower rate of tax than you do. See our guide to tax and your partner for more information. 19. Children's savings Stop children being taxed at source on their savings by completing a simple form (R85) on their behalf. Tax savings for older people 20. Age-related allowance If you are aged 65-plus you may be eligible for an increased personal allowance. This means you pay a lower income tax rate. See Tax in retirement. 21. National Insurance Make sure you stop making National Insurance contributions if you carry on working beyond state retirement age (currently 62 for women and 65 for men). 22. Gift Aid If you are over 65, making donations to charity through Gift Aid can reduce your taxable income to below the threshold at which you start to lose out on age-related allowances. 23. Tax relief on gifts If you are in a higher tax bracket, you can claim back the difference between the basic and higher rate of income tax on any Gift Aid donations. 24. Inheritance tax Lifetime gifts are not normally counted as part of your estate for inheritance tax purposes if you live for a further seven years after making them. Known as potentially exempt transfers (PETs) they can reduce your residual estate significantly. See our blog on inheritance tax. Tax savings through employee benefits 25. Season ticket loan If you are a commuter, check to see if your employer will give you a tax-free loan to buy your season ticket. 26. Pool cars Use a pool car for occasional business travel, if your employer provides these. 27. Childcare schemes and tax credits If you are an employee and pay for childcare, ask your employer if they have a childcare scheme. Salary sacrifice childcare schemes are easy to establish and can result in substantial savings for both employees and employers. For more details see working for an employer. Child tax credits can also save you money. 28. Company car? If you are entitled to a company car, consider whether it would be more tax-efficient to take a cash equivalent in pay instead. 29. Going green If you are changing your company car, consider a low-emissions model . These are now taxed at a lower percentage of their list price, than cars with a high CO2 rating. 30. Pay in to a pension scheme Contributions to your employer's pension scheme (including any additional voluntary contributions you make) can be made from your gross pay, before any tax is charged. For the most up to date and accurate advice speak to tax accountant, as these allowances and benefits do change every year. Tax Affinity Accountants are expert Qualified Tax Accountants in Kingston upon Thames. To read more visit www.taxaffinity.com/blog and please feel free to comment and share this with your friends. |
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