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Busy Practitioner by Mark McLaughlin ATII TEP

This article outlines some forthcoming key deadlines and practice points for accountants and tax practitioners.

Tax Credits

Practitioners will be aware that the Child Tax Credit and Working Tax Credit are effective from 6 April 2003. An estimated 90% of families are eligible for Tax Credits, and around four million self-assessment taxpayers have advisers. The following practice points should therefore be considered.

• To enable an agent to deal with the Inland Revenue regarding a client’s Tax Credit claim, a valid authority form 64-8 must be held by the tax office. Forms 64-8 submitted to the Revenue before 1 April 1999 are not acceptable for these purposes, and new authority forms may be required. As an authority only covers the named individual, if dealing with Tax Credit forms for the client’s partner or spouse, separate forms 64-8 will be required.

• Practitioners making ‘protective’ Tax Credit claims for clients have until 6 July 2003 to do so. Such claims preserve Tax Credit entitlement for the whole year, as awards can only be backdated three months. Protective claims should be considered particularly for clients whose anticipated income levels in 2003/04 make entitlement to Tax Credits uncertain (e.g. individuals with variable income), or in anticipation of a change in a client’s circumstances (e.g. threat of redundancy).

• Practitioners’ letters of engagement for clients may need adapting, to cover the new Tax Credits. The practitioner’s responsibilities should be clearly explained in the engagement letter, and specify if the scope of that engagement excludes Tax Credit claims.

• The Tax Credits system is supported by a penalty regime. For example, failure to notify certain changes in a claimant’s personal circumstances could attract a penalty of up to £300, if not notified within three months. In addition, failure to provide information or evidence required by the Revenue can give rise to an initial penalty of up to £300, followed by penalties of up to £60 a day if the delay continues (see Working Together, Issue 12). Practitioners should therefore stress to clients the importance of promptly notifying changes in circumstances or dealing with the Revenue on Tax Credit matters. The engagement letter should make these points clear to the client.

Pay as you earn

The 2002/03 tax year end results in another round of pay as you earn (PAYE) returns for employers and their agents. The following PAYE matters are worth noting.

• Employers and agents are reminded that PAYE and National Insurance contributions deducted from employees in 2002/03 should be paid to the Inland Revenue by 19 April 2003, in order to avoid interest charges.

• The Inland Revenue no longer has any objection to employers giving duplicate forms P60 to employees, e.g. if an employee has mislaid the original and needs evidence of earnings. However, any duplicates should be clearly marked with the word ‘duplicate’.

• Practitioners offering payroll services to employers may wish to begin preparing for the introduction of compulsory e-filing of End of Year returns (forms P35 and P14), commencing with 2004/05 End of Year returns for employers with 250 or more employees, and ending with compulsory e-filing for all employers by 2010. A new penalty of £3,000 per annum will apply if the employer (or agent) fails to e-file an End of Year return under the new system, in addition to the existing late filing penalty (see FA 2002, ss 135-136). However, financial incentives are offered for employers with fewer than 50 employees to e-file End of Year returns between 2004/05 and 2008/09. The implications of compulsory e-filing need to communicated to client employers (see Tax Bulletin Issue 63, February 2003).