Tax Enquiry Form?

bristol_pilot

My tax affairs are quite simple: higher rate tax-payer on PAYE who also gets a few £k of investment income that has been taxed at basic rate. Up until last year, I used to have to fill in a tax return (self-assessment) to tell the taxman how much investment income I has received. Last year, I was told that I had been taken off self-asssessment as my affairs are simple and was asked to fill in a Tax Enquiry Form which basically collected the same information.

They also said that I would not be sent the Tax Enquiry Form every year. Sure enough, I have not received one for the 2005-6 tax year. I cannot understand how the taxman will make sure that I have paid the correct amount of tax. Obviously my investment/employment income is not exactly the same as the previous year (it is higher, as it happens). Next year it will be lower, as I will be increasing my pension contributions. Should I write in and tell them what my income is? Or request a form or maybe ask to go back on self-assessment? What I definitely do not want is to be asked in several years' time to account for my income going back over several years!

Anyone out there understand the UK tax system?!

reddevilled

They will adjust your PAYE code so that they collect an amount of higher rate tax on your investments. This could be too much or too little especially if the amoun you receive each year fluctuates. We are in the era of self assessment so it is your responsibility to ensure you pay the "right" amount of tax, which basically means that the Revenue don't care if you pay a bit too much but do if you pay too little!

I would keep an eye on your tax each year using one of the many tax calculators available for free on the internet and if it seems that you have over or underpaid by a fair bit then inform the Revenue and pay your dues / collect a repayment.

schiff

bristol_pilot

This is the way the IR has gone in recent years. They are not bothered too much about whether the average PAYE taxpayer is under or overpaid (within reason) as it's not cost effective for them to see it through to the bitter end. They prefer to concentrate on the self-employed and company directors, where the pickings are richer, or any individuals for whom they receive third-party info, enquiries into which might achieve 'a result'!

My own position, and that of some of my clients, is never spot on via the allocated coding, because of fluctuating income etc (as in your case), and I and they seldom get a full return, or in some years any at all. My modus operandi is to do my own calculations at each year end and, if an overpayment arises (of any amount), claim it. If the calcs result in a modest underpayment (anything up to £80 or so) I wouldn't bother volunteering the information (unless I had been served with one of the shorter return forms of course - when you should give accurate figures).

The full return is a legal document but I don't think the shorter ones are. If you didn't tell them you were liable (for say £76.75 tax) they are not likely to take proceedings against you, charge penalties, etc for such a trivial affair.
An assumption yet to be tested, I rush to add!!!

Mikeyorks

bristol_pilot wrote:

I cannot understand how the taxman will make sure that I have paid the correct amount of tax. Obviously my investment/employment income is not exactly the same as the previous year (it is higher, as it happens).

They can't ....unless the investments are all such that they are mandatorily downloaded into the Revenue's data warehouse by your investment sources?

Presumably your current coding contains a HR restriction which is the same as that derived from the last Tax Enquiry Form? As you sound 'tidy minded' - I would personally 'appeal' the current coding and ask they increase the HR restriction to reflect figures you simply provide on a signed A4 - for the current year.

The Revenue issues close to 10m SA Returns each year - of which approx 4M relate to people on PAYE / pensions. And they are attempting to reduce your / their workload in cases where it is 'appropriate'. Edited extract from HMRC :

Generally the types of people who will no longer need to complete an SA Return are those with very straightforward affairs.
The changes mean:
· higher rate employees with simple affairs will no longer be sent an SA Return; ·
· the investment income limit will rise to £10,000 (from current limit of £8,500);
· some relaxation to the rules for pensioners (where further liability can be recovered through the PAYE coding).

After 6 April 2004 when a 2003-04 or later Return is filed and captured onto our systems it will be automatically checked against the new rules. Where appropriate, the process will automatically:
· Stop the issue of any further Returns if the person longer meets the new SA criteria.
· Send a letter to the taxpayer and agent (where authority held) explaining the change in procedure and setting the taxpayer's responsibilities.
· Notify the PAYE coding record of any changes required for the following year.
· Identify those cases where taxpayers need to return certain information (i.e. investment income) affecting coding, on a coding review form (the 'P810') which sent the following April.

Some taxpayers may prefer, for varying reasons, to continue to receive an SA Return. As long as we are notified we override the signals on the system and the taxpayer will continue to receive Returns.

I've made the last bit bold as it may have some (perverse) appeal??;)

bristol_pilot

Thanks everyone.

I think I'll request going back on self-assessment, I found it much simpler than chasing around with tax codes. They have sent me so many coding notices this past year that I could have papered my walls with them.

I have not done a full calculation yet, but I reckon I will have underpaid for 2005-6 by about £300. A bit strange if they are not bothered about collecting that, if potentially multiplied by the number of similar underpaying taxpayers. I was contacted out of the blue by the NI records office last month about £42 that I had overpaid in 2000-1, so I am thinking that the tax office will probably catch up eventually. I am sailing pretty close to the £10k investment income limit that triggers the self-assessment form anyway. And, yes, I am quite tidy-minded and only want to cope with one tax year at a time.

Cheers everyone.

ctm_2

schiff wrote:

The full return is a legal document but I don't think the shorter ones are. If you didn't tell them you were liable (for say £76.75 tax) they are not likely to take proceedings against you, charge penalties, etc for such a trivial affair.
An assumption yet to be tested, I rush to add!!!

For clarification, both the full and short Self Assessment Tax Returns (the SA100 and SA200) are legal documents, and must be completed and sent back.

The review forms (P810, R40 etc) on the other hand are not, and do not have to be returned if you don't want to.

Self Assessment Tax Returns are the only forms that HMRC will call 'returns'.