| 1.1 | This guide to the legal
framework is an up-date of what was ‘Self Assessment
Technical 2: Self Assessment: the legal framework’, commonly
referred to as ‘SAT 2’. The original SAT 2 was written
in 1994 (and updated in 1995) to introduce the new Self Assessment
scheme. Legislation to pave the way for the change, from HMRC
assessing taxpayers to a scheme of self assessment, was included in
the 1994 Finance Act. The legislation laying down the procedures
for income tax Self Assessment (SA) is in Taxes Management Act 1970
(TMA). |
| 1.2 | This legal guide was
written in 2003. It deals with the system for the assessment and
collection of income tax. It describes the SA scheme as it is after
more than five years of practical operation, after changes in
Finance Acts 1995 to 2002 and after decisions made by the Special
Commissioners about the meaning of the legislation in TMA. |
| 1.3 | SA affects individuals,
partnerships and trustees who receive tax returns, together with
companies that are not resident in the UK and are not trading in
the UK through a permanent establishment. It also affects
individuals who do not receive a tax return, but need to claim a
tax relief or allowance and companies making claims outside their
company tax returns. SA has applied since the tax year 1996/97
(although for some partnerships the rules did not apply in full
until 1997/98). This guidance does not deal with corporation tax
Self Assessment (CTSA). For companies, CTSA applies to all company
accounting periods ending on or after 1 July 1999. The CTSA scheme
is described in ‘A Guide to Corporation Tax Self Assessment
– For Tax Practitioners and HMRC Staff’. |
| 1.4 | Many taxpayers with
simple affairs who pay their income tax through PAYE do not need to
make an annual tax return. Many others file their tax return
electronically through HMRC’s Internet service on the website
at www.hmrc.gov.uk Those who have filed electronically, or have
used an approved substitute form, in the previous year will receive
a Notice, after the end of the tax year, requiring them to file a
return. Computer-generated paper ‘substitutes’ will no
longer be accepted for years 2007-8 onwards Others are sent a paper
tax return which incorporates the notice to file. Customers who do
not receive a notice to file, but have received untaxed income or
made a capital gain in the tax year have to inform HMRC by 5th
October following the end of the tax year. However, for National
Insurance purposes a customer who starts a new self-employment must
notify HMRC within three months of starting up in
self-employment. |
| 1.5 | SA includes a requirement
to file returns by a fixed date. From 2007-8 paper returns must be
filed by 31st October. The deadline for filing returns
electronically is 31st January. Returns issued after 31st July
following the end of the year of assessment must be filed 3 months
from date of issue or 31st January if later and the return is filed
electronically. For each tax year some self-employed taxpayers have
to pay an initial payment on account of income tax due on the 31st
January in the year preceding the year of assessment. A second
payment on account is due on the following 31st July, and a final
balancing payment of any residual income tax due, capital gains tax
and Student Loan repayment, on the 31st January following (the same
as the usual filing date for that year's return). |
| 1.6 | Taxpayers have only one
annual tax bill based on the figures in their tax return. HMRC
undertake to calculate the tax liability and notify this to the
taxpayer before 31st January where the tax return is received by
31st October following the end of the tax year. Tax Returns
received after 31st October should contain the taxpayer's own
calculation of the tax charge (a self assessment). One of the
advantages of filing a Return through the Internet service is that
the tax is calculated automatically for the taxpayer. HMRC send
statements of account of the taxpayer's Self Assessment account
showing charges and payments received |
| 1.7 | Taxpayers can get help
with completing their tax return through the internet service,
their local HMRC office, the Helpline on 0845 9000 444, or any HMRC
Enquiry Centre. |
| 1.8 | All business profits and
investment income are taxed on a current year basis, and
partnership profits are taxed on the individual partners rather
than on the partnership itself. ITSA includes capital gains and
losses as well as income. |
| 1.9 | There are automatic
sanctions for failure to comply with the filing deadline. HMRC
process payments and returns on receipt as though they were
complete and correct, but then have the right to enquire into any
return, to check its accuracy, within a fixed time limit. |
| 1.10 | This guidance contains a
description of the legal framework for the Self Assessment system.
It covers |
|
- the procedures for making personal tax
returns, including the self assessment (Chapter 2)
- the payment of tax (Chapter 3)
- formal procedures for HMRC enquiries into
the accuracy of returns (Chapter 4)
- the procedures for making partnership
returns and for enquiries into the accuracy of those returns
(Chapter 5)
- claims, elections and notices (Chapter
6)
- Income tax Self Assessment for
non-residents (Chapter 7)
- other issues – assessments,
employees, trustees, personal representatives and beneficiaries
(Chapter 8).
|
| 1.11 | All references to statute
are to the Taxes Management Act 1970 (TMA 1970) unless indicated
otherwise. |
