A tax on your ingenuity
Saturday 12 April 1997
Having opened it your dreams are already fading. So, what are the points to bear in mind if the dream is not to become a nightmare?
First of all, in the immortal words of Corporal Jones in Dad's Army: Don't panic. Start by checking that the Revenue has sent all you need. You will have the basic eight-page return, plus various supplementary pages. It will have worked out what it thinks you need based on what it knows about your tax affairs. But if you had a new source of income in 1996/97, you may need more supplementary pages - if so, contact your tax office now.
Most people won't get a return at all. If you're one of these lucky ones that isn't an end to it. If there has been a change in your circumstances - you've started to let a property or are receiving some untaxed income, for example - you must tell the Revenue by 5 October. If it's a small amount of interest the Revenue will probably collect the tax through your tax code, but this new income may well trigger a return for you to complete.
In any event, having got a return, where to begin? Firstly, it's an information- gathering exercise: you need to assemble things like P60s and P11Ds (these are the forms your employer gives you recording pay and tax for the year and benefits respectively). Ask the bank or building society for details of interest credited to your accounts, if these are not sent to you automatically.
Dig out all your dividend counterfoils? If you have realised capital gains, make sure you have details of the sales and the cost of the assets. And, of course, any other income you have.
Now you can begin. Put on some soothing music in the background, have a drink to hand (as a reward for finishing it, not to steel you to begin) and approach the return like an exam paper - read it carefully, begin at the beginning and work through carefully. If you get stuck, have a look at the notes the Revenue supplies - or phone your taxman. They have realised that people will want help at all sorts of strange hours, so their telephone help lines will be open evenings and weekends.
At some stage, you will need to decide whether you are going to calculate your tax liability yourself, or leave it to the Revenue. If the latter, the return must be submitted no later than 30 September. Calculating the tax yourself wins you an extra four months to do so, since the deadline for submission goes back to 31 January 1998. But take care. The tax calculation is not straightforward - the Inland Revenue's calculation form shows how complex our tax system is!
Do bear in mind in all of this that there is an automatic pounds 100 penalty for submitting your return late and an incomplete return counts as one that has not been submitted. There will be a final payment to make as well, normally on 31 January 1998. If payments on account are needed for 1997/98, the first instalment is due on the same date. Pay late and interest starts to run.
If the amount you owe is modest - under pounds 1,000 - and you are paid under PAYE, your underpayment can be collected through your code number for 1997/98, but only if your return is submitted by 30 September.
Finally, having submitted the return and paid your dues, keep your supporting records intact. All taxpayers must keep them until at least 31 January 1999. The self-employed and those with income from the letting of property must retain records until 31 January 2003.
Setting aside enough time to deal with one's tax affairs is easier said than done, especially when the pressures of work and having the odd hour for sleep mean that there is precious little free time available already. There are plenty of offers of help around - for a fee, of course. It could be money well spent, but go to a reliable tax professional and obtain advice, not just a form-filling exercise. Give us time as well - I hope not to have too many potential clients knocking on my door on 30 January.
So, as the "SA" race starts, let's all remember that this is not a race for hares (who might make mistakes) nor tortoises (you can be too slow). But I'd be happy to offer a metaphorical bottle of champagne to the first reader to submit an accurate return to accurately to the Revenue.
John Whiting is a tax partner at Price Waterhouse
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