Volunteer for a tax return

Think you might owe money? Tell the Revenue, says John Kimmer

The Inland Revenue sends out more than 8 million tax returns each year. There's lots of confusion about who needs a return (the majority of taxpayers do not receive one) but many people don't realise that it's up to them to alert the Revenue if they have extra tax to pay. At worst, you could end up with hefty fines and back tax to pay.

If you have been sent a return you must complete it and get it to the Revenue by 31 January 2000. If you want the Revenue to work out the tax for you, try to get the return in by 30 September 1999.

Most people who receive returns automatically are self-employed or higher- rate taxpayers with some investment income. If you are an employee you will have tax deducted from your salary under PAYE, based on a tax code issued by the employer at the start of the tax year. Provided the code is correct, the right amount of tax will be deducted by the end of the tax year. If you are an employee on PAYE and have no reason to think that you might owe some extra tax for last year then you need not worry about completing a return. Your employer gives full details of your taxable benefits, such as a company car, on form P11D and submits the form to the Revenue.

In some cases it will be clear that more tax is due. For example, you may have become self-employed during the year but not registered with the Revenue. You might have received income with no tax deducted from a new source or made a capital gain by selling some shares or an investment property. If so, you should contact your tax office and ask for a return.

You might also have to pay more tax if your salary has increased, taking you into the higher-rate tax bracket of 40 per cent. If you have investment income on which you have only paid tax at the investment rate of 20 per cent, you will have to pay extra tax, so you must get a return.

If you are employed, ask the payroll or human resources department for the number of your tax office. If you are self-employed or retired, phone the local tax office for help. You have to ask for a return by 5 October. If the tax return is not issued to you by 31 October, you have three months from the date of issue to complete it.

The penalty for ignoring extra tax can match the amount you owe on 31 January after the tax year concerned. In practice it is unlikely that the maximum would ever be imposed. And even if you miss the deadline of 5 October, as long as you pay all the tax due by 31 January you will not incur a penalty.

If you think you may have overpaid tax (for example, because you are a non-taxpayer but have received some income with tax already taken out, or because you are an employee with costs such as car expenses for which you could claim tax relief) you should also ask for a return to make sure you receive repayments due to you.

If you are unsure whether you need to complete a tax return and would prefer to be reassured without contacting your tax inspector, get some advice from a qualified adviser.

n John Kimmer is a chartered tax adviser and the vice-president of the Association of Taxation Technicians.