HMRC are in the process of issuing reminders to those tax credits “customers” who estimated their income for the previous year (the year ended 5 April 2012) – asking them to provide details of their actual income.
You must supply HMRC with details of your actual income before the period expires on 31 January 2013.
And HMRC are very forthright in explaining what will happen if you don’t:
- you might not be get everything you’re due
- you could be paid more tax credits than you’re entitled to – an ‘overpayment’ which you’ll have to pay back, and you may also be asked to pay a penalty.
HMRC are reminding tax credit claimants to renew claims by July 31 or their claims may stop.
If you’re self employed and you will not have your final income figures for 2011/12 by the end of July you will be allowed to extend the notification period until January 31, 2013 but you must still contact HMRC before the end of July to renew your claim.
And don’t forget there are tax planning situations attached to tax credit claims, especially if your profits have fallen during the recession.
Don’t forget that if you took advantage of extending the notification period until 31 January 2012 you must supply HMRC with details of your actual income before the period expires on 31 January 2012.
HMRC are very forthright in explaining what will happen if you don’t:
- you might not be get everything you’re due
- you could be paid more tax credits than you’re entitled to – an ‘overpayment’ which you’ll have to pay back, and you may also be asked to pay a penalty.
I have spent most of this afternoon unravelling a client’s accounting records because he had included all his transactions (cash, bank, credit card, deposit account, etc.) on a single page spreadsheet.
Dennis Howlett mentioned this earlier today:
I have said it hundreds of times but it is worth repeating: spreadsheets are not business class tools, they are general purpose tools. In the wrong hands, which includes 90% of accountants, they are positively dangerous.
Looking at the spreadsheet I had two choices, accept the figures (which too many accountants do as a matter of course) or check every entry was correct. Fortunately I chose the latter because the client had understated his income by £8,000.
This is precisely the type of mistake HMRC are looking for because as well as charging you tax on the mistake and interest for late payment they’ll add a penalty of up to 100% of the tax due and, to add insult to injury, may even fine you for having inadequate records.
The message is simple – don’t use spreadsheets use a decent accounts program.
HMRC are reminding tax credit claimants to renew claims by July 31 or their claims may stop.
If you’re self employed and you will not have your final income figures for 2010/11 by the end of July you will be allowed to extend the notification period until January 31, 2012 but you must still contact HMRC before the end of July to renew your claim.
And don’t forget there are tax planning situations attached to tax credit claims. Just this afternoon we managed, by extending a self employed client’s year end from March 31 to April 6 to claim a tax repayment for 2009/10 while making sure he qualified for full tax credits in 2010/11 and 2011/12.
Just when we all thought we had the Tax Return deadline under control the Tax Faculty of the Institute of Chartered Accountants in England & Wales has reminded us that
It’s time to deal with any unfinished tax credits renewals.
The article splits the action required into three distinct areas:
- If the tax credit claimant has already given HMRC all the required information for 2009/10, there should be nothing more to be done.
- If the claimant did his or her renewal by 31 July 2010 but used an estimate of 2009/10 income, then 31 January 2011 is the deadline for providing final figures.
- If the claimant did not return the TC603D form, or phone HMRC with the details, by 31 July 2010, it is a different matter
If you fall into the third group you must read the article itself to make sure you do the right thing but I suggest it’s well worth reading for anyone who claims Tax Credits.
Do please contact me if you need any advice or help.
The Government has published next year’s rates and thresholds for income tax, NICs, tax credits and ISAs.
The personal tax allowance will rise by £1,000 to £7,475 (as we knew).
· The higher rate income tax threshold will be £35,000 (compared to £37,400 in 2010/11)). The intention is that higher rate tax payers will not gain from the £1,000 rise in the personal tax allowance.
· The threshold for the additional (50%) rate of income tax stays at £150,000.
· The income at which the personal allowance begins to be clawed back remains at £100,000.
Claimants who renewed at 31 July 2010 using estimated income figures should give HMRC final 2009/10 figures by 31 January 2011.
The HMRC press release states, in rather threatening terms:
Letters will start to land on doorsteps this week urging claimants to contact HMRC as soon as they know their final income figure for the previous tax year – and no later than 31 January 2011. The amount that tax credits claimants receive can change as their situations change.‘Failing to provide the correct details could lead to an overpayment. And supplying incorrect information could even lead to a penalty.’
About 18 months ago a client told me she was changing to another accountant to save money. I don’t know how much she was going to save and to a large extent it’s irrelevant as today she sent me an e-mail which said
I have to say I’ve not be thrilled by the service at *************** but I guess you get what you pay for. ……….. I get the impression my current accountant is working for the tax man rather than me and she’s not been able to advise me on how I can get the best assistance during this next 12 months or so.
This client’s circumstances will change dramatically in the next year – her income will drop considerably and she will have to work fewer hours in her business. Unlike her new accountant, however, I regard this as an opportunity to use tax planning and Tax credits to minimise her loss of income.
A case of the glass being half full rather than half empty. When did you last hear an accountant say that?
The passing of the tax return deadline (January 31) doesn’t make tax planning any less important or urgent.
Believe it or not there are other equally important dates in the year – April 5th (the end of the tax year) and your business year end, for example – which should be considered in tax planning.
Over the next few weeks I shall be giving readers some useful pointers on subjects such as tax credits, dividend planning and profit sharing.
