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Other Measures
Tax return deadline
As previously announced, self-assessment returns for tax year 2007/08 may still be filed online up to 3 1 January 2009. Returns in hard copy will have a new earlier deadline of 31 October 2008. The due dates for paying tax are not affected (3 1 January 2009 for the balancing payment of income tax and CGT for 2007/08).
Payments on account (POA)
Self-assessment taxpayers have to make two payments on account, on 3 1 January during the tax year and 31 July following, based on the self-assessment tax liability of the previous year. No POA are due if the previous year’s liability does not exceed £500 or 20% of the total tax payable. The £500 limit will increase to £ 1,000 from 6 April 2009 onwards, i.e. for the 2009/ 10 payments on account due on 31 January 2010 and 31 July 2010. HMRC are introducing measures to allow payment of tax by credit card.
Errors and mistakes
At present, different time limits apply for HM Revenue & Customs to assess underpayments of the different taxes (income tax, corporation tax,VAT) and for taxpayers to reclaim overpayments. These time limits are to be rationalised with effect from 1 April 2010: for simple errors, the taxman and the taxpayer will have just four years to make a correction (currently up to six). For a failure to take reasonable care, the taxman will still have six years to assess income tax and corporation tax, but only four for VAT. The time limit remains 20 years for attempted fraud.
At the same time, penalties for incorrect returns and failing to notify liability will be reformed and made consistent across the taxes. The changes will apply to chargeable periods starting on or after 1 April 2009.
The following changes were included in the 2007 budget
Enquiry window
The tax authorities can open an enquiry into a tax return within a year of the filing deadline. For 2007/08 returns, the “window” will be one year from the date the return is received by HMRC, finally offering an incentive for filing tax returns early.
Revenue enquiries and penalties
Since the Inland Revenue merged with Customs & Excise, the powers of the combined department have been under review.The intention is to make the powers to enforce all taxes – and the penalties for non-compliance – consistent.The Budget includes proposals to move towards this objective.
Anti-avoidance
Closing down loopholes has become a regular feature of Mr Brown’s Budgets and several of the press releases supporting the speech contained detailed rules to stop the cunning plans of lawyers. These are probably only of interest to people who want artificial tax plans – they will need to know that some things no longer work!
Environmental measures
The Chancellor was very keen to parade his “green” credentials. These included significant increase in Vehicle Excise Duty for the highest gas-guzzling cars, announcing fuel duty increases for the next three years and increasing the rates of landfill tax.
One major revenue-raiser which was presented under this category is the revision to empty property relief for business rates from April 2008.The relief will now be restricted to the first three months for office and retail premises and six months for factories and warehouses. This is intended to encourage rapid reuse of such properties rather than development of Greenfield sites.
Charitable giving
The Chancellor announced in his speech that he was concerned that not all the available Gift Aid relief was claimed by charities and donors. However, the one change announced related to an unusual situation: where a donor receives a benefit in return for making a gift to charity, income tax relief is not generally available. This rule is relaxed where the value of the benefit is much less than the value of the gift, i.e. the transaction is essentially a donation but the donor receives something in recognition of making it. The limit on the benefit for gifts of £ 1,000 or more has been 2.5% of the gift, subject to a maximum of £250. With effect from 6 April 2007, these limits are increased to 5% and £500.This means that the benefit on a gift of £6,000 could not exceed £300. This rule is particularly relevant at charity auctions where people tend to pay a very large amount for trivial purchases - the intention is to make a gift, and the relief for such a gift is more likely to be available as a result of this change.
