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Help with tax returns and income tax payments

The start of the New Year makes many taxpayers and all accountants think about the annual headache of completing tax returns.

If you don’t already know, the filing deadline for your 2010 tax return is 31 January 2011.

You need to act now if you have not sent in your form, but what are the penalties if you fail to send in the form on time or pay your tax late?

Penalties for late personal tax returns
A 2010 tax return sent in after 31 January 2011 will incur a penalty of £100. This applies in all cases including returns that show that no tax is due.

This is a change from earlier years. Previously, penalties were cancelled if all the tax was paid before the due date.

A further penalty of £100 is payable if a 2010 return is still outstanding on 31 July 2011.

You must pay any tax due shown on the return by 31 January 2011.

Payment of income tax – late payment interest
If you pay your tax late, the Revenue charges you interest. The current rate is 3%, charged as simple interest on a daily basis.

For example, if you owe tax of £10,000 and pay the bill 10 days late you will owe interest of £8.22 (£10,000 x 10/365 x 3%).

This is not viewed as a penalty because you are purely reimbursing The Crown for the use of the money at a commercial rate.

In fact, you could say it is quite a generous rate compared with borrowing from your bank or credit card.

Payment – late payment surcharges
Any tax owing from the 2009/10 tax year that remains outstanding on 28 February 2011 is liable to a late payment surcharge.

The penalty is 5% of the tax due for 2009/10 that remains unpaid at 28 February 2011.

Using the £10,000 example, this would give a penalty of £500 (£10,000 x 5%).

This is a flat penalty and would apply in full if payment is made on, say, 4 March 2011 or 4 June 2011.

A further flat rate penalty of 5% applies  to any tax owing for the 2009/10 tax year that remains unpaid at 31 July 2011.

Partnership tax returns
A partnership or limited liability partnership (LLP) needs to send in a partnership tax return.

Penalties are due on late forms.

All partners are fined £100 if a 2010 tax return is not sent in by 31 January 2011. A further penalty of £100 applies per partner if the return is still outstanding by 31 July 2011.

Reasonable excuse
In some circumstances, penalties may be waived if a tax return or tax payment is made late. Such examples could be a prolonged period of illness or family bereavement. The tax office must be notified.

It is sometimes possible to avoid surcharges by agreeing a payment plan to pay any outstanding tax over an extended period. This must be in place before the tax becomes payable.

Estimated returns
If you still do not have all the information to complete your tax return, you can submit an estimated return. You must tell the Revenue what items of the return are estimated and when you believe you will be able to resubmit the return with the actual figures. This should avoid the late tax return penalty.

Please contact us if you need help with your 2010 tax return.

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