Enter Your E-mail

Busy Practitioner by Mark McLaughlin ATII TEP

Mark McLaughlin ATII ATT TEP outlines a one-off key tax deadline and outlines a new facility for individuals to give tax repayments to charity via the self-assessment tax return.A forthcoming, ‘one-off’ deadline is relevant to many more practitioners than originally anticipated.

6 September 2004

Practitioners should now be familiar with form 42, dealing with transactions involving shares, certain other securities or options acquired in connection with the employment. The requirement to report employment-related securities and options was introduced in Finance Act 2003 (ITEPA 2003, s 421J). For 2003/04, the reporting deadline in most cases is 6 July 2004, which of course has already passed. However, on 22 June 2004 the Revenue acknowledged that many practitioners were unaware of the new requirements until close to the reporting deadline and also accepted that problems were encountered by some in downloading and printing form 42 from its website
(http://www.inlandrevenue.gov.uk/shareschemes/42-2004-q8-31.pdf).

In most cases, the Revenue will not impose a penalty if the completed Form 42 reaches them by 6 September 2004. In addition, there was some confusion whether the deadline was actually 7 September 2004. This resulted in the Revenue announcing a further concession that penalties will not be pursued if the required information reaches them by 7 September 2004.

The Revenue sent form 42 to many employers with employee share schemes shortly after 6 April 2004. In those cases, the completed forms must still reach the Revenue before 7 July 2004. However, if form 42 was issued on or after 8 June 2004, the submission deadline is extended to 30 days from the date of issue (s 421J(6)).

Form 42 is a somewhat lengthy sixteen-page return. However, the Revenue have confirmed that the relevant information can be provided in alternative formats, such as in a spreadsheet or letter. The legislation provides that a ‘responsible person’ has a duty to provide the information, the categories of which include employers but not practitioners (s 421L). However, the Revenue has indicated that this responsibility can be delegated, and it therefore seems that practitioners are able to make reports in their capacity as agents for the company.

The maximum penalty for late submission of form 42 (or equivalent) is £300 per reportable event if the Revenue instigates penalty proceedings before the Commissioners, with further penalties of up to £60 per day if the delay continues (TMA 1970, s 98). The fact that penalties are charged separately for each reportable event means that the same company can be potentially liable to multiple penalties for the late submission of information, even though no tax is actually due (e.g. upon the initial transfer of subscriber shares from company formation agents to directors or employees, and on a subsequent issue of shares). Failure to comply could therefore be costly.

Charitable giving

FA 2004 introduced a facility for individuals to give all or part of a tax repayment to charity, via the self-assessment return for 2003/04 (see Question 19A) and later years. The charitable donation qualifies as a gift aid payment, although it is treated as made when received by the charity. This means that it is not possible for taxpayers to elect for the payment to be treated as having been made in the previous tax year.

For example, if the taxpayer’s 2003/04 self-assessment return generates a tax repayment, this will normally result in the charity receiving a donation during 2004/05. If so, the repayment is treated as a gift aid donation by the taxpayer during 2004/05, and details should be entered on the taxpayer’s return for that year.

Charities wishing to participate in the scheme are required to register with the Revenue. The charity is allocated a unique reference code, which the taxpayer enters on the self-assessment return to identify the charity. This code can be obtained by telephoning the relevant tax office or the self-assessment helpline, or online through a search engine on the Revenue’s website: (http://www.inlandrevenue.gov.uk/charities/charities-search.htm), which is regularly updated to include details of all UK charities and similar bodies registered to accept donations of tax repayments via the self-assessment tax return.

Taxpayers may restrict the donation of a tax repayment to a maximum amount if they are uncertain of the repayment due, for example if the Revenue is asked to calculate the tax. The individual can claim relief from higher rate tax by making a gift aid declaration confirming that sufficient income tax and capital gains tax will be paid in 2004/05. The gift aid declaration is made by the taxpayer (or agent) ticking box 19A.4 on the 2003/04 self-assessment return. There is also a facility on the return for taxpayers to donate tax repayments under gift aid anonymously if they wish.