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Busy Practitioner by Mark McLaughlin ATII TEP

This article outlines some key deadlines and practice points for accountants and tax practitioners.The 31 January 2003 filing deadline for most 2002 tax returns of individuals, trustees and personal representatives is quickly followed by another key date in the Self Assessment calendar in the vast majority of cases, i.e. 28 February 2003. Any balance of income tax, capital gains tax and Class 4 National Insurance contributions based on 2002 tax returns (due to be filed by 31 January) must be paid by this date, in order to avoid a five per cent surcharge being automatically imposed (TMA 1970, s59C).

Due dates for tax payments

In fact, the taxpayer has 28 days from the due date to pay the tax. So for 2002 tax returns issued after 31 October 2002 (if the taxpayer notified chargeability by 5 October 2002), the relevant surcharge date is 28 days following the tax payment date, which is three months from the return’s issue date (TMA 1970, s59B(3)). In Thompson (Inspector of Taxes) v Minzly [2002] STC 450, the taxpayer’s liability was paid in full during the 29th day from the due date. The High Court held that tax was outstanding on the 29th day because it remained unpaid during the earlier part of that day, and that the surcharge was therefore valid.

Tax payments should be made in good time. The Revenue must receive payment before expiry of the 28-day period after the due date. In Bancroft v Crutchfield (Inspector of Taxes) 2002 SpC 322, the taxpayers posted their tax payment to the Revenue by cheque on the 28th day following the due date. The Revenue received it on the 29th day, and issued a surcharge liability notice. The Commissioner rejected the taxpayers’ arguments and dismissed their appeal against the surcharge.

A correctly imposed surcharge is due for payment within 30 days from the date of imposition. Interest is imposed on a late paid surcharge from the end of that 30-day period until payment. This is in addition to the interest charge on overdue tax.

Following the initial surcharge for tax payments more than 28 days late, a further 5% surcharge is imposed unless the outstanding tax is paid within six months from the due date (i.e. 31 July 2002 in most cases).

Can anything be done?

• A surcharge may be avoided by contacting the Revenue and agreeing ‘Time to Pay’ arrangements before the relevant surcharge date, and provided that all payments are made on time in accordance with the agreement (see Self Assessment Manual - Surcharges).

• The taxpayer may appeal against surcharges to the Commissioners within 30 days of imposition, if the taxpayer had a ‘reasonable excuse’ throughout the period of default, e.g. if a cheque is lost in the post or is ‘bounced’ in error by the bank (in practice, the Revenue will allow up to 14 days for payment after the reasonable excuse has ended). However, the Revenue does not consider (among other factors) inability to pay the tax, pressure of work, failure by the agent or a tax return not submitted to be reasonable excuses.

The Revenue may consider not imposing surcharges (or may possibly reduce them) in cases of hardship. An appeal against the amount of surcharge can also be made, if it is considered incorrect (see SABK/7 Self Assessment – Surcharges for late payment of tax).

Surcharges and penalties

Finally, it is worth noting that the Revenue may not impose a surcharge if the tax paid late has attracted a tax-related penalty, i.e.

• for failure to notify liability; or

• for failing to file a return; or

• for fraudulently or negligently delivering an incorrect return; or

• for delivering an incorrect partnership return or accounts.