If you are self-employed, the owner of a company or receive funds other than the general PAYE salary, you are liable to pay tax. In the recent times, HMRC has had some strict policies regarding penalties you can incur for making mistakes, both deliberately (in order to avoid the tax or to pay less than the actual amount they owe) or unintentionally. So how confident are you about filling in your self assessment tax return form in correctly?
According to research conducted last year, 56 per cent of small businesses and companies feel they would require the services of chartered accountants in order to fill in the tax forms for them. These figures are astonishing given the form requires the individuals to fill it themselves.
So what concerns do tax payers have in relation to the self assessment tax return? Why do some individuals feel they need help to fill in the forms? We have tried to conduct research and have found out that most individuals feel it is not possible for them to leave out even the smallest of details about their businesses and incomes as they are afraid of the repercussion threatened by the tax office.
HMRC take hardline
The majority of people filling out a self assessment tax return form are mindful of the harsh consequences if they make a mistake – even if it is an honest mistake. In today´s fragile economy, a £100 penalty is not something that can be taken lightly, especially small businesses, contractors and freelances who already live on a tight budget. Not to mention you feel aggrieved for being penalised for something you did not know about.
One of the common mistakes people make when filling out tax forms is that they write notes on pages like “Continue on next page.” Never do this! You can avoid this in online submission of the form. The HMRC has defined the deadlines to the individuals and has given them the options to opt for either the printed version or the online version for the submission of their forms.
The penalties dished out by HMRC vary depending upon the seriousness of the case. The standard penalty charge for late entries and mistakes is £100, but this increases over time if you fail to pay within a certain period. For example, a three-month delay will cost you £10 more per day up to maximum 90 days resulting in £900 in addition to the fixed tax. Similarly, a six-month delay will cost £300 or 5% (whichever is higher) and if it prolongs for a year, it will cost £300 or 5% (whichever is higher) and 100% of the tax with the penalties as well.
Another common error is that people do not sign the form. This is also seen as negligence and could be considered as fraud that leads to prosecution charges! Of course, this is an extreme example, but one that highlights just how tough HMRC have become with regards self assessment tax returns.