Get in training to clear tax hurdles
Paul Slade looks at books and software covering self-assessment
Sunday 03 March 1996
He makes it all seem cosy. But the changeover that gets under way in the next financial year will mean that 9 million taxpayers who are self- employed or have a second source of income could face automatic fines if they fail to complete and return their tax return by the Revenue's deadline. The first returns go out on 6 April 1997, and must be returned by 31 January 1998.
The fines start at pounds 100 for missing the 31 January deadline and can rise to pounds 60 a day.
The system will start to make an impact on 6 April this year. From that date all taxpayers, including those who are on PAYE, will be under a legal obligation to keep records of all their income and capital gains, which must be retained until 22 months after the end of the tax year to which they relate. The maxium fine for failing to keep records, which will be levied if the Revenue has reason to believe you are trying to defraud it, is pounds 3,000.
Some experts believe the switch to self-assessment is the biggest change to the tax system since the introduction of PAYE in 1944. So, how helpful are the guides and computer software available to help us cope?
Self Assessment, A General Guide and Self Assessment, A Guide for the Self-employed (Inland Revenue, free).
Our chubby friend is present throughout the Revenue's five booklets, variously pictured as a soldier, a greengrocer and a trapeze artist, presumably with the intention of making the leaflets as accessible as possible.
The text, while on the whole plain, does occasionally slip into gobbledegook. Take this extract, which is part of the section on what is called current- year assessment: "Under the old system your tax assessment was based upon your trading profits for the 12-month period ending in the tax year before the year covered by the return." But, under the new system: "If your accounting period is different to the tax year, then tax will be calculated on the profit arising in the 12-month period ending in the tax year."
The main weakness of the brochures is their failure to distinguish where the self-assessment rules merely duplicate what already applies and where they bring in something new. The money spent on the eight-minute animated video and audio cassette supplied with the booklets could have been better spent on more detailed information.
Verdict: A useful starting point but tends to raise more questions than it answers.
Guide to Self-Assessment for the Self-Employed, by Peter Gravestock (Tolley's pounds 16.95).
This goes into much greater detail than the Revenue's brochures and is well-organised and full of worked-through examples that allow you to understand the practical effect of the principles described. He does not skimp on detail but apart from the odd slip manages to avoid jargon. Here is Mr Gravestock on the same current year principle described by the Revenue: "The profits shown by the accounts drawn up each year will be taken as those for the year to the following 5 April." Rather better, I think.
Having said that, this is a comprehensive guide to a demanding area and should be approached only if you are willing to fully get to grips with the subject.
Verdict: A good meaty guide for the self-employed. Expensive, but could save you money.
Best Books (pounds 95 + VAT) and MacMoney (pounds 84.99) (distributed by Softline).
Several suppliers will have self-assessment software available in time for the April 1997 deadline. In the meantime, there are already many packages on the market that can help you keep the income and other records you will need from April this year.
Best Books lets you keep a purchase and sales ledger, list of invoices and payroll records, as well as many other small business functions. The system is in the "windows" format, and you can easily switch from one function to another.
Like all software, Best Books takes a while to understand but is reasonably clear once you have played with it for a while, and the prompts are good.
I selected the system's freelance writer option and within an hour was happily using the sales ledger to mail lists of outstanding invoices and other sources of income in spreadsheet format, recording the imaginary payments as they came in.
The program automatically adds VAT at the applicable rate, totals the columns and updates other relevant documents as you work. There is a matching purchase ledger to list the outgoings.
Although MacMoney claims to be suitable for both individuals and small businesses I found Best Books far easier to use. MacMoney seems fine for balancing your cheque book or trying to budget your personal spending, but Best Books would be a much more practical tool for keeping your tax records.
Best Books needs an Apple Macintosh computer system 6 or later, with hard drive and two megabytes of available memory. MacMoney needs a system 6.03 or later and two megabytes of available memory. Both products are available only for the Macintosh.
Verdict: Best Books is a practical and easy-to-use business records system that you should be able to get to grips with quite quickly. MacMoney is more suitable for home use.
o Inland Revenue: 0345 161514 Tolley: 0181-686 9141 Softline: 0181-401 1234.
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