Bamboozled by that tax form? Start here

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The Independent Online
THE END of September is approaching, and with it the deadline to send back your tax return if you want the Inland Revenue to calculate your tax bill for you.

It is also the final deadline if you have a modest tax liability of less than pounds 1,000 and want this to be deducted from your salary next year through the PAYE system, otherwise it may all become due as a lump sum in January.

Last year's experience showed there are some parts of the self-assessment form that are causing problems for the unwary. Tax professionals at the Chartered Institute of Taxation have sorted out several of the most common pitfalls:

First of all, many taxpayers still do not realise they cannot get away with filling in the form with phrases rather than figures. At the very least you should estimate a figure on the basis of the information you have. Indicate on the return that it is provisional, and will be updated when the figure becomes available. Tick box 22.3 and explain in the space for additional information why the full information is not available and when it is expected.

If you are self-employed it is often worth sending accounts and computations with the return if they contain additional information that the tax office may need to understand the figures. This will ensure full disclosure to the Revenue. It is still essential to complete the boxes on the return (and on the supplementary pages where appropriate) with figures from accounts or computations.

This is particularly important if you have the self-employed supplementary pages. Boxes 3.16 to 3.52 demand a breakdown of self-employed income and expenses where the turnover is above pounds 15,000. This breakdown will in due course be used by the Revenue in their inquiry procedures.

The headings on the tax return may be different from those shown in your accounts and it may be necessary to add together figures to show the best fit with the boxes on the form. It is important that the allocation is done on a consistent basis each year, otherwise the computer will identify an unexplained variance.

One confusing section of the form is question 19, which says "do you want to claim a repayment if you have paid too much tax?" Many people last year answered "no" on the basis that they owed tax to the Revenue for 1995/6 or earlier years. Unfortunately those years are handled by a different computer and the effect is that any over-payment this year will not be used to offset the earlier underpayment. It may be better to ask for the repayment and note in the additional information that the repayment should be set off against the earlier years' liabilities.

Box 22.4 asks if you have made payments of rent to someone outside the United Kingdom. This does not refer to the holiday villa you rented in Spain. It does apply if you are renting property in the UK and are paying rent to a non-resident landlord. (So many people were confused by this last year that it is being dropped for the 1998/9 tax returns.)

Question 16 on allowances is also a problem. It refers to the additional personal allowance available in some circumstances if you have a child living with you. Many married couples with children have claimed both the married couples' allowance and the additional personal allowance for children. In fact, this is only available to one-parent families, or to a married couple where one partner is disabled. The 1998/9 return will contain an additional box to make this clearer.

Most of the returns rejected by the Revenue are sent back for basic reasons. Apart from mathematical errors and transpositions, many people ticked the box indicating that a supplementary page was attached and then forget to include it.

Where possible the Inland Revenue will correct any errors and send you a notice of correction, but you should check the revised figures to make sure you agree with the amendment. Fortunately, the most common mistake is also the easiest to sort out: forgetting to sign or date the return.

Nigel Eastaway is chairman of the technical committee at the Chartered Institute of Taxation.