Working Together Issue 7

 

Tax Return Filing

In our June 2001 edition we asked you for feedback on how both the Revenue and Tax Agents could "spread the load" of filing Tax Returns. Once again many thanks to those of you who took the time and trouble to write in. We will be returning to many of these themes in future editions.

Overwhelmingly what did emerge was the feeling that it is mutually beneficial to have a much more even filing pattern throughout the year and to avoid "bunching" near or on the filing date. Many of you felt that client education was important and that the Revenue should take more of a role in this. We will take this forward with our Working Together partners and return to it in a future edition.

The Revenue's analysis over time of the results from settled enquiry cases shows that Returns which are filed later than the statutory filing date, present a significant compliance risk. The Revenue will be acting on this analysis by using late filing as one of the risk factors which determine the cases that are selected to be reviewed for an enquiry. Please also remember that clients whose Returns are filed late will also be subject to a longer "enquiry window" - 15 months rather than 12 months. For these reasons we recommend that you file clients' Returns as soon as possible to avoid any risk of missing the filing date.

At the beginning of December we started to contact by telephone three groups of taxpayers:

  • those who had been late filing their 1999/00 Return
  • new SA taxpayers
  • SA taxpayers also in the Construction Industry Scheme

in each case, telephoning those who had not yet filed their 2000/01 Return to remind them of the January filing date.

If the taxpayer is represented by an agent, we will also ask them if they have sent all the information needed to enable their agent to complete the Return. If not, they will be asked to do so as soon as possible, or contact their agent straight away if there is a problem with this.

We are using new telephony and letter systems which will enable us to make quicker and more effective contact with large numbers of taxpayers in order to improve filing and payment compliance. For those who do not respond to these contacts we will make increased and quicker use of Revenue Determinations and daily penalties.

Now Improved: Filing by Internet - the ITSA Internet Service for Agents (PDF 78K)

Agents can now send individual Tax Returns (SA100) and Supplementary Pages over the Internet on their client's behalf, provided only that the Revenue holds a form 64-8 for that client.

Class 2 NIC Late Filing Penalty

We have received a number of letters about various aspects of the Class 2 NIC Late Filing Penalty. For example, many of you asked why the registration period has been set at 3 months, what consultation was undertaken and so on. An article dedicated to the Late Notification Penalty was featured as Tax Bulletin 53A (August 2001). www.inlandrevenue.gov.uk/bulletins/index.htm

New Code of Practice 1

On 31 October we introduced a new Code of Practice 1, "Putting things right when we make mistakes", which reflects important changes to our redress policy.

The new Code is a shorter, more straightforward booklet which seeks to develop further the positive relationship which already exists between the Revenue and our customers. It encourages us to work with customers in putting things right quickly, avoiding wherever possible, unnecessary extra costs.

Where our mistakes do lead to additional costs, the new Code should make it easier to reclaim them. The mistake will no longer need to be serious or persistent before we would consider a claim for costs; and we will now consider a claim where there has been an unreasonable delay as opposed to the previous requirement for there to be a six month delay.

But redress is more than just about paying money. Apart from putting things right quickly, an apology and explanation is often all people want; and we want to encourage staff to take a flexible approach to sorting out problems and considering redress. In particular we want to look at innovative ways to make telling us about mistakes easier, so that we can respond quickly and without too much inconvenience to the customer. We would be interested in hearing your views on what we could do to achieve this.

Certain things in the Code have not changed. We will still only consider reimbursing costs directly to an agent in exceptional circumstances, such as in cases where most or all of their clients are affected by the same mistake. We know that this concerns many of you but we hope that by working together to put mistakes right quickly and without fuss we can avoid agents spending too much time on this unproductive work.

We aim to review the Code of Practice next summer and we will revise it to reflect feedback. So your views on the new Code, and in particular how it is working in practice, are very important to us. We want to have a Code that is useful and fair to all our customers and we appreciate the many helpful contributions many of you have already made to the new Code.

Please contact the Working Together Team.

Copy Information to Agents

We have been asked to clarify the Revenue's policy on supplying copy information, for example, Returns, following appointment to act as agent for a new client.

Our approach is that we would first ask you to obtain the information from your client. Where the client cannot supply the information, we will provide the copies as requested. However, some agents send the Revenue a standard letter as a matter of course, requesting, for example, the previous 6 years' Tax Returns. We ask that you only request the information you need.

We would also ask that you advise your clients to retain appropriate records in the future.

The Self Assessment Business Calendar

The planned dates for the next issue of Self Assessment communications are as follows:

Issue dates Documents

7 to 19 December 2001 Agents' Client Account Information

10 to 20 December 2001 Taxpayer Statements

19 to 28 December 2001 Reminders for payments due 31 January 2002

Payment of Self Assessment Liability

Further to our article in "Working Together" issue 2, we have been asked to provide more guidance about payment of Self Assessment tax.

We accept payment by a range of methods but recommend that payment is made electronically. There are several electronic payment methods you can use:

  • your bank's Internet banking service - enter details of your payment into your PC
  • telephone banking - telephone your bank with payment details
  • Girobank BillPay - use the Internet to pay by Switch or Visa Delta debit card. Please log on to our website at www.inlandrevenue.gov.uk/ebu/billpay.htm and follow the instructions
  • Debit card over the telephone: Taxpayers with a Switch, Solo or Visa Delta debit card can pay by telephoning 0845 305 1000 between 8.00am and 10.00pm.

If an electronic payment is not possible you may find it convenient for payment to be made by Bank Giro or at the Post Office. These methods are quicker than payment by post.

Where payment is made by other than electronic means, it is very important that your client's payslip accompanies the payment. The encoded personalised details on the payslip issued with the taxpayer statement and the agent Client Account Information, will ensure the payment is allocated quickly to the right account.

Where payment is made by post, please send it with your client's personalised payslip to the Accounts Office in the envelope we send with the Statement. Do not leave payment so late that it has to be made to the local office. Paying direct to the Accounts Office will ensure your client's account is updated quickly.

If you pay by post please don't:

  • enclose compliment slips or a courtesy letter
  • staple or attach paperclips to cheques and payslips.

Our aim is to process all cheques on the day of receipt so that your client's record is updated the following day. The automated equipment which opens, sorts and processes cheque payments is most efficient when handling individual cheques each accompanied by a personalised payslip. And that is where you can help us by ensuring that postal payments reach the Accounts Office without any additional material in the envelope.

If you do not use the correct payslip, or you attach a staple or paperclip, or you enclose a letter or include a compliment slip we have to deal with your payment manually. This delays processing and the update of your client's record and increases the potential for error.

Where payments are sent to the Accounts Office it is best to have a single cheque and a single payslip. But if you need to send a composite payment for more than one client on a single cheque, please ensure there is a separate personalised payslip for each taxpayer and not a paper schedule. Where the composite payment is for a partnership, please advise how the payment should be split between the partners. Also check that the individual amounts for each taxpayer add up to the total of the cheque. If the cheque and payslip amounts do not agree this delays the updating of the records for all the taxpayers involved.

If you have an enquiry about making payment please telephone the Accounts Office. The telephone number is shown on the back of the Statement. There is more information on making payment on the Inland Revenue website www.inlandrevenue.gov.uk.

Please note that any query about the tax liability on the Statement should be taken up with the local Revenue Office.

Reprint of Company Tax Return and Guide

New prints of both the Company Tax Return form - CT600 (2001) and the Company Tax Return Guide are now available. The Tax Return is a reprint of CT600 version 1 suitably updated for recent changes and is not a new version. Because of this, some of the box numbering is out of sequence; although this makes some users slightly uncomfortable, it minimises the changes required both for the Revenue's computer system and for commercial software providers.

Any existing stocks that you hold of the CT600 Return for accounting periods ending after 1 July 1999 can still be used provided all the entries that are needed are present on the form. However, the new form will be essential if a company wants to claim:

  • Double Taxation Relief carry backs
  • tax credits for remediation of contaminated land
  • capital allowances for conversion of parts of business premises into flats.

The new form will not be needed to claim capital allowances for energy saving plant and machinery as this can be included in the existing box for expenditure qualifying for first year allowances.

More detailed information about the changes incorporated in this reprint is available on the Corporation Tax Self Assessment area of the Inland Revenue website. www.inlandrevenue.gov.uk/ctsa/index.htm

Copies of the new forms can be downloaded from the CTSA/ more information page at www.inlandrevenue.gov.uk/ctsa/further.htm and Forms/CTSA at www.inlandrevenue.gov.uk/ctsa/returns.htm of the Inland Revenue website. Up to 50 copies of each form can also be ordered through the CTSA Orderline (telephone 0845 300 6555 or fax 0845 300 6777). The Orderline is open 7 days a week between 8.00am and 10.00pm. Revenue Offices do not hold supplies of these forms.

Company Tax Return - Completing Box 79

Tax Bulletin 52 (April 2001) published an article entitled "Corporation Tax - Large Companies: Quarterly Instalment Payments and Group Payment Arrangements". See www.inlandrevenue.gov.uk/bulletins/index.htm

This included guidance on the need to enter an X in Box 79 where a company considers that it was liable to pay Corporation Tax by quarterly instalments (QIPs) on the basis of its self -assessment. Unfortunately Box 79 - page 5 (short calculation) or page 8 (detailed calculation) - is still sometimes not being completed when an entry is needed. Even if QIPs have been correctly paid in full, or made through a Group Payment Arrangement, an X should still be entered in Box 79.

The latest imprint of the Company Tax Return Guide (2001) has been amended to give more specific guidance in this area (See note 34). It covers the entries a company should make on the Return form if it pays by QIPs and/or through a Group Payment A rrangement.

The Revenue computer system will initially calculate, charge and credit interest on the basis of the entry (or lack of an entry) in Box 79. The normal "process now, check later" principle of Self Assessment is applied to all aspects of the Return, and the liability to pay QIPs is no exception. An incorrect entry or omission at box 79 is likely to lead to unwanted repayments or demands, and extra work for all parties.

Large Business Office

The Large Business Office (LBO) has recently amended the names given to each of its offices to better describe the business carried out. Each of the LBOs primarily dealing with Corporation Tax has now assumed the name LBO (Corporation Tax) and the offices dealing with employer compliance formerly called the Large Employer Compliance Office (or LECO) have now assumed the name LBO (Employer Compliance).

No changes have been made to the location of any of the offices and contact should continue to be made as before. It would be appreciated if all written correspondence included the revised names to ensure that it is received by the correct office.

Company Tax Return - Marginal Small Companies' and Starting Rate Relief

Some Company Tax Return (CT600) forms are being completed wrongly when there is a claim to marginal rate relief. The form should be completed by entering, in Boxes 42 and 52, the Corporation Tax chargeable before any such relief using only the rates of tax authorised by law. So for financial years 2000 and 2001, where there is marginal rate relief you should be entering 20% or 30% in boxes 41 and 51. The amount of marginal starting rate, or small companies' relief which reduces the tax so chargeable, should be entered in Box 60 (and included in the computation you attach).

Sometimes the tax chargeable entered in Boxes 42 & 52 is being calculated from an effective marginal rate of tax, such as 15.5% and entered in boxes 41 or 51; no entry is then made in Box 60. Although this may give an amount of tax payable that is very close or even identical to the correct figure, there is in strictness no such rate of tax in law.

It is in everyone's interests to complete form CT600 correctly, using only the correct rates of tax as shown in the table on page 12 of the Company Tax Return Guide. Follow the guidance at notes 15 and 16 and those on the CT600 itself.

We will be reviewing the Company Tax Return Guide next year to see if it can be made more helpful. We are also considering putting a calculator for marginal rate relief, for both starting rate and small companies' rate, onto the Inland Revenue website.

Self Assessment Statements of Account for Small Amounts

We do not routinely issue Statements of Account for amounts of less than £32, but we do issue one Statement a year for all new charges, regardless of the amount. This is done to ensure all taxpayers receive some form of acknowledgement of their liability.

Example

An unrepresented, self-calculating taxpayer submits their Return showing a liability of £25. If the Return was processed without the need for any revision, no Tax Calculation would be issued. If we did not issue a Statement shortly before the liability became due, then nothing would be issued until the following year's Return was processed. Assuming this took the taxpayer's combined liability over £32, the earliest notification a taxpayer would receive would be more than 12 months after the liability became due, by which time interest would have accrued.

The payslip box at the foot of the Statement is left blank if the sum of the amount already due and any amounts becoming due are less than £32. The customer service message on the Statement alerts the taxpayer to the interest position:

" The amount shown is small. If you do not wish to pay this now it will be added to your next Statement but you may be charged interest if you pay late."

We are giving consideration to not issuing payslips with statements where there is a repayment or no amount to pay or a small amount to pay. But we need to think about how to ensure that people who want to pay amounts, no matter how small, are given the means to do so.

Stamp Taxes Bulletin

Stamp Taxes have introduced a regular bulletin to keep customers up to date with the latest developments. It will be issued at least twice a year and aims to provide the answer to stamp duty questions on a variety of topics.

The first edition, published in August, looks at stamp duty rules on goodwill and intellectual property, explains the basis of charging on fixed and moveable items and reminds customers about Adjudication procedures.

The Bulletin will not give all the information that customers need, but it aims to help people make the most of services available from their local Stamp Office, and understand their obligations in paying the right amount of tax.

The Bulletin is available in both paper and electronic versions and is published on the Stamp Taxes website: www.inlandrevenue.gov.uk/so/stbulletin.htm.

If there are any topics that customers would like to see included in future editions please contact, Pauline Hudd, the editor, on 0117 9273742.

Issue of supplementary pages with the Trust and Estate Tax Return

In April 2002, for the first time, we will issue some supplementary pages with the Trust and Estate Tax Return. The two combinations we are introducing are:

  • Trust and Estate Return plus Land and Property Pages
  • Trust and Estate Return plus Capital Gains Pages.

When the last received Trust and Estate Tax Return included Land and Property and/or Capital Gains Supplementary Pages, one of the above packs will be issued automatically.

There are currently no plans to extend this range, so Trusts and Estates with other combinations will only receive the core Trust and Estate Tax Return.

Internet Services for Companies

Earlier this year, representatives from the Revenue, commerce and tax agents participated in a joint workshop on the future of e-services for companies. This produced an outline plan taking into account the benefits and priorities for small, medium and large companies. It achieved in 3 days what would otherwise normally have taken months.

We plan to go live in December 2001, initially, on a trial basis with "View Liabilities and Payments" for single companies. This was the customers' top priority service identified at the workshop. Soon after this we will be looking to provide agents with access to this view service for their clients, again on a trial basis. Following an evaluation of the two trials we will be extending these services to a wider audience during 2002. We will then offer additional services to help customers with their e-contact with the Revenue. This will include, "View Liabilities and Payments" for Groups, e-filing of CT600s and an e-workspace as well as improvements to the Revenue website.

To gain access to the e-services for your clients you will need to have sent the Revenue a signed 64-8 from your client. If you haven't sent us a 64-8 please start to do so now so that you can use the e-services as soon as they become available.

Finally we are looking for views and comments on whether you would like the services to operate with Digital Certificates or User ID and PIN number. Any views or comments please to karen.haydon@ir.gsi.gov.uk

CGT Shares Identification Rules - Transfers between Married Couples

An article has been published in Tax Bulletin 54 (August 2001) at www.inlandrevenue.gov.uk/bulletins/index.htm entitled "Capital Gains Tax (CGT): Holdings Of Shares: Matching Acquisitions And Disposals - A Second Instalment."

Briefly, where shares are transferred between spouses, the basic identification rule treats the shares as acquired at the date of the transfer; however, the taper relief rule looks back to the date of original acquisition by the first spouse. This article explains the consequences of this difference in practice.

The "first instalment" on CGT and holdings of shares dealt with some points on the `same day' and `bed and breakfasting' rules and was published in Tax Bulletin 52 (April 2001).

Revenue Review of Face to Face Services

The Revenue is reviewing the quality of the services it provides to customers who call in at Inland Revenue Offices. Although agents generally may tend not to do this, the Working Together Team would welcome feedback from any agents who sometimes do call in at Inland Revenue Offices, for example an Inland Revenue Enquiry Centre (IREC), perhaps to obtain information. We are particularly interested in visits other than those to attend a pre arranged meeting with a Revenue officer or just to deliver something personally such as a Tax Return.

We would like to know

  • whether you find such visits useful and
  • why you would consider calling in person rather than telephone or write?
  • if you do sometimes visit our offices in this way, are there specific types of queries you prefer to handle this way?
  • is the outcome of your visits usually worthwhile?
  • what might improve this?
  • could the Revenue do anything to make other means of communication such as telephoning or writing, more attractive?

The Working Together Team contact details are given below.

31 January 2002 Filing Date

As this is our last edition before the Return filing date on 31 January 2002, we thought that this would be a good opportunity to draw your attention to a couple of points.

  • The statutory filing date is 31 January 2002 for Returns issued at the normal time. Any Returns received after that date are late.
  • Our offices are not open 24 hours a day, but some have letterboxes which are accessible from the street. We will assume that any Returns which are found in office letterboxes when we open them on Friday 1 February were delivered on 31 January 2002 and therefore filed on time.
  • Any Returns which we know were received after midnight on 31 January (including electronically-filed returns) are late.

Following the Special Commissioner's decision in the case of Steeden v Carver, we do not charge a late-filing penalty for Returns received up to midnight on 1 February, even though these Returns have been filed late.

  • Again, our offices will clearly not be open at midnight; so we will assume that any Return found in an office letterbox on the morning of Saturday 2 February 2002 was received on 1 February. (Our offices have been instructed to ensure that letterboxes do not overflow. Depending on local circumstances, letterboxes will be cleared from time to time over the weekend.)
  • Returns assumed to have been received on 1 February have been filed late (and so, for example, the "enquiry window" will be extended to 30 April 2003) but will not attract a late-filing penalty.
  • Any Returns which we know were received after midnight on 1 February are late (and so, for example, the longer "enquiry window" will apply) and a late-filing penalty will be charged.

NB: Not all of our offices have letterboxes which are accessible in out of office hours.

Speaking of late-filing penalties, many of you have rightly criticised us for the number of incorrect late-filing penalties which have been issued. We are very sorry about this and we are trying to identify the reasons for these and put things right. We know that many of them are our fault and we are working hard to improve our performance. But there are some things that you could do to help us help you.

  • If you are submitting a partnership Return along with the partners' Returns, please do not staple them all together or put them inside one another. There is more of a chance of these being missed, especially at peak filing periods, leading to the unnecessary issue of filing penalties.
  • Again on partnerships, if there has been a change in the membership of the partnership, please tell us as soon as possible so that we can update our records and make sure that the correct Return goes out.
  • We will not know that a late-filing penalty should be "capped" until we have had the chance to fully process the Return.
  • Encourage your clients to get their records in to you as early as possible to help you spread the load of Tax Return filing.

Agent Step by Step Guide to Internet Service for Self Assessment (PDF 78K)

Editorial

Working Together is a joint initiative with the CIOT, ICAEW, ATT, ACCA and ICAS. Although the material in this publication obviously reflects discussion and consultation with these bodies, the Revenue is solely responsible for its contents and for the views expressed in it.

Contact details & back issues

Back issues can be downloaded from our featured area on the Revenue website www.inlandrevenue.gov.uk.

If you would prefer a paper copy, please write to or e-mail the address below.

Copyright

Working Together is covered by Crown Copyright. There is no objection to firms copying the publication for their own use.

Anyone wishing to re-publish Working Together or extracts more widely, should write for permission to Greig Rattray,

Working Together Team, 7N South West Wing, Bush House, London WC2B 4RD or e-mail: Greig.Rattray@ir.gsi.gov.uk.

   
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