Important information
Following the Carter review, HMRC is making substantial and important changes to the self assessment system effective from 6 April 2008. The headline changes include:
- An earlier deadline for paper returns (31st October 2008)
- Substitute SA100, SA800 and SA900 tax returns replaced by "identical" returns intended to be used only for a very few exceptions
- Significant changes to the content and presentation of SA tax returns
- Abolition of the Share Scheme and Pension pages and a new Additional Information form
- CGT computations for each disposal must be attached in PDF format
- The ability to amend a tax return online
- Some client data will be available to agents on the HMRC web pages
- HMRC's audit "window" will be the 12 month period from the filing date
The above changes will bring about major changes to accountants' working practices and especially those who do not currently file online. We explain the changes in more detail below, as well as:
- The impact on accountants' working practices
- How TaxCalc 2008 will help you cope with, and take advantage of, these changes
TaxCalc tips
- Register to file online immediately. You can "test file" online returns, so you can try out the system in advance to ensure you are ready for the peak periods.
- Explain the benefits of online filing to your clients in readiness for 2008. They include:
- Avoiding HMRC's 5% error rate transcribing paper returns, with a saving of time, cost and client confusion
- "Batch" filing of multiple returns
- Immediate confirmation of successful filing: no "lost" paper returns
- Faster repayments for clients
- Cost savings in time, postage, paper and ink
- Check that share brokers providing CGT computations provide them in appropriate PDF format for you to attach to your online filings
Risks to practitioners
- Currently HMRC manually transcribes paper return data into its back end software. Inevitably there are errors in that manual process resulting in around 5% of calculations being wrong. Using TaxCalc to file online avoids the time and cost involved in checking and correcting HMRC’s processing errors
- The changes to the new forms and the abolition of unique box numbers results in significant "mapping" problems, and will make it much more difficult to review current and past year returns manually.
- TaxCalc's display of the previous year entry for each box does that for you
Working practices
- Electronic filing
- The benefits to practices from filing online are considerable in their own right
- You can use TaxCalc's "client questionnaire" to gather client data electronically
- You can also use TaxCalc to "data mine" your clients' data for marketing or compliance purposes
- It is quick and simple to file online with TaxCalc
- Electronic client approval
- TaxCalc enables simple client approval of draft returns by email
- Attach the tax return to the email as a PDF
- The "IR Mark" allocated to the return will be included on the return, so as to validate the return data and the client's approval
- HMRC's policy on client approval is that:
- Agents must make a copy of the information before it is sent which is authenticated by the client's signature. However it is not prescriptive about the method of signature
- Both the information copy and the signature can be either electronic or paper
- SA200 "short" tax return
- A return can still be filed online for a client who has received an SA200 short return – it is simply treated as an SA100 return
- Amendments
- It will be possible to amend a 2008 Tax return online
- Up to 8 amendments will be possible (1 return plus 8 amendments)
- Online filing service
- The online filing service will become a multi-year service. The 2007-08 return will be the first of the new system
- In April 2009 it will be possible to file both 2007-08 and 2008-09 tax returns online
- In April 2010 it will be possible to file 2007-08, 2008-09 and 2009-10 tax returns online, and so on
- CGT
- Whilst the new form is much shorter, a computation will need to be attached for every disposal
- For online filings, this will need to be in PDF format
- If clients receive calculated share broker data, it will need to be in electronic format with PDF computations to file online
- Unique taxpayer reference (UTR)
- A UTR is required to file online – ensure that UTRs are obtained for new clients at the earliest opportunity
- 2008 client data from HMRC
- HMRC will be making available the client data for certain fields of the 2008 return via its web site
- You will be able to see this information for any client for whom there is a 64-8 registered with HMRC
- The important fields are underpayment information included in the tax codes and the state pension received (others include UTR, NINO etc)
Computer generated substitute tax returns
- HMRC will not accept old style computer generated substitute paper SA100, SA800 and SA900 returns for 2008. These are replaced by "identical" returns
- Other substitute forms such as R40, CT600, SA303, 64-8 etc will continue to be accepted
- There will be "identical" SA100, SA800 and SA900 returns that can be generated by TaxCalc. These are intended to be used only for "excepted persons", but HMRC has said that it will process all identical returns that it receives
- The exceptions (there are less than 1%) comprise:
- MPs and certain other groups. Those affected will be informed by HMRC by mid-April
- Those people for whom technical limitations to HMRC’s filing service prevent them from filing online. As far as possible TaxCalc will notify you on the 'Check and Finish' screen if the return cannot be filed online for this reason
- "Identical" returns must be printed in greyscale or colour – not black and white
- IMPORTANT: HMRC has stated that it will be monitoring use of "identical" returns and will withdraw this concession if it is abused
- There are some obvious practical difficulties:
- For security reasons, clients may not wish to tell you that they are "exceptions"
- HMRC will not be able to tell you whether or not the client is an "exception"
- It is not known what error message will be received from HMRC if you try to file an "exception", It is likely to be a 1046 "authentication" error, but it will certainly not be explicit as to the cause of the failure to file online
The latest (near final) draft 2008 tax returns
The new forms and most Help Sheets will be available to view and download from our 'Support' menu from 6 April 2008. All SA100 series forms have major cosmetic changes including:
- The removal of unique box numbers
- The removal of the "net" and "tax" boxes where possible
- The use of separate boxes for each character to enable automatic data capture
- The removal of less common items from other forms to the SA101 Additional Information form
Although the form is designed to allow automatic data capture, the 2008 forms will still be captured manually.
The principal changes include:
SA100 core return
- The new form is only 6 pages
- Less common items including life insurance gains, gilts, stock dividends, tax avoidance and married couples' allowance have been removed and now appear on a new SA101 "Additional Information" form
- There is aggregation of some items (for example interest)
- There is a new entry for income from service companies
- The donation of a repayment to charity is now done on a separate SA100 Charity form
SA101 new Additional Information form includes:
- Gilts
- Stock dividends
- Share schemes and lump sums
- Reliefs
- Age related married couples allowance
- Pension charges
- Tax avoidance
SA102 Employment
- is now only 1 page of information (page 2 is for a 2nd employment)
SA103 Self employment
- There are now 2 forms (Short and Full). The criteria used to determine whether or not a Full form must be used are extensive and include:
- Annual rate of turnover £64,000 or more
- The basis period differing from the accounting period
- A change of accounting date
- AP ending in 2007-08 and its results were reported on an earlier return
- Practising barristers
- CAs claimed for items other than equipment & machinery
- Overlap relief claimed
- Change from cash basis to GAAP
- Businesses carried on abroad
- If the annual rate of business turnover is less than £30,000, then you can choose to complete only an abbreviated account comprising the income, expenses and resulting profit or loss from which capital allowances are then deducted
- The short form does not include balance sheet information
- You can opt to use the full form instead of the short form
SA106 Foreign
- Dividends totalling less than £300 gross can be reported on the core tax return, so avoiding the need to complete the foreign pages if that is the only foreign income
- Remittance basis claims are now reported on page 1
- Unremittable income requires additional information to be reported via the “Additional Information” box or a PDF attachment
SA108 Capital gains summary
- A simplified 2 page form with disposals sorted into categories (listed shares, unlisted shares and other disposals) plus a summary
- There must be a computation for each disposal attached as a PDF. TaxCalc will automatically prepare these for you
SA110 Tax calculation summary
- This will not be issued unless requested. There is no "tax due" box on the SA100 itself
SA100 Charity form
- This is a new separate form for those wishing to donate some of a repayment to charity
Self assessment filing deadlines for the
tax year ended 5th April 2008
- An "Excepted person" is one who is unable to file online for operational reason (e.g. MPs and certain civil servants) or for technical reasons
- The deadlines to have tax of less than £2,000 collected via a tax code are
- 31st October 2008 for paper filings
- 30th December 2008 for online filings
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