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07 March 2001
Replies to Queries – 3
Really necessary?
It appears that some tax agents were issued with Notice SA501 on 1 February 2001, stating that the entire self-assessment balance of tax should be paid immediately in order to avoid legal proceedings, etc.
As the Inland Revenue slightly relaxed the filing and payment dates for 2000 returns (although this did not seem to get through to some Inspectors of Taxes), the issue of the notice on 1 February seems to be precipitate and well out of order. What do readers think?
(Query T15,766) – Crushed.
Really necessary?
It appears that some tax agents were issued with Notice SA501 on 1 February 2001, stating that the entire self-assessment balance of tax should be paid immediately in order to avoid legal proceedings, etc.
As the Inland Revenue slightly relaxed the filing and payment dates for 2000 returns (although this did not seem to get through to some Inspectors of Taxes), the issue of the notice on 1 February seems to be precipitate and well out of order. What do readers think?
(Query T15,766) – Crushed.
Replies to Queries – 3
Really necessary?
It appears that some tax agents were issued with Notice SA501 on 1 February 2001, stating that the entire self-assessment balance of tax should be paid immediately in order to avoid legal proceedings, etc.
As the Inland Revenue slightly relaxed the filing and payment dates for 2000 returns (although this did not seem to get through to some Inspectors of Taxes), the issue of the notice on 1 February seems to be precipitate and well out of order. What do readers think?
(Query T15,766) – Crushed.
'Crushed' seems to have become a little confused. But this may be understandable in view of the misinformation concerning the apparent extension to the tax return filing date. It should be stated up front that the payment date was never extended. Tax due on 31 January 2001 will be subject to interest charges if it was received on or after 1 February 2001. As a result, the issue of a notice SA501 cannot be said to be precipitous if a tax office was aware of the amount outstanding on that date. Over the past five years, the Inland Revenue has sought to toughen up its image as a benign creditor and practitioners should actively encourage their clients to pay their tax on time. From personal experience, I know that it is now much harder to arrange settlement periods than it ever was previously and we must therefore ensure that our clients are re-educated to the new(ish) ways of working.
Two further points are worth making. First, anyone with a 2002 diary will be aware that 31 January 2002 falls on a Thursday. So even applying the current Steeden v Carver extension gives taxpayers until Monday 4 February (and advisers a crucial additional weekend).
More importantly, however, the extension is only relevant for the purposes of penalties under section 93, Taxes Management Act 1970. For enquiries, the window of opportunity is provided by ibid., section 9A(2). That considers the actual date on which a tax return is delivered. A 2000 return delivered on 31 January 2001 may be enquired into at any time up to 30 January 2002, but a return delivered on 1 February 2001 can be enquired into at any time up to 30 April 2002. – Kalonymous.
If a client knows tax is due on a particular date, why should he expect additional credit simply because in the past the Revenue was less efficient at chasing debtors? We all have clients who are slow in paying their tax, or perhaps have always wanted to pay over 2 to 3 months. At a recent meeting, the Revenue indicated that such arrangements, which might have been agreed in the past, can no longer be assumed. The view of Inspectors of my acquaintance seems to be that the profit was earned at least 10 months ago so the taxpayer has had ample time to provide for the tax.
The Collector of Taxes no longer allows the 'traditional' 14-21 days grace before seeking to recover tax, especially in those cases where taxpayers have been slow to pay in the past. This year two clients were telephoned by the Revenue by 7 February seeking unpaid tax and wanting to make arrangements to call. In the first case the amount was substantial, in excess of £100,000, and in the second, although the amount was lower – less than £10,000 – the client had a record of taking unagreed time to pay. There would be genuine cause for concern if the Revenue did nothing to remind taxpayers before the end of February and simply collected the 5 per cent surcharge.
The issues of payment and the filing of returns are separate matters. Payment of any tax due is the fundamental priority. Otherwise why should the penalty for a late return only apply when tax is paid late after 31 January? We should not complain if the Revenue wants to be paid what is due. If the client knows the amount due, when it is to be paid, and the method of payment, then we should not be surprised if the person owed the money wants to be paid. We expect clients to settle our fees in accordance with agreed terms! – Rookery.
Editorial note. Whilst I do not dispute the rationale behind 'Rookery's' clinical approach, my view is that human beings are not clockwork machines and a touch of humanity over payment requirements makes the world a better place. I doubt whether readers telephone their clients for instant payment of fees at the moment they become due, and if they try it they might find their client list shrinking.
Really necessary?
It appears that some tax agents were issued with Notice SA501 on 1 February 2001, stating that the entire self-assessment balance of tax should be paid immediately in order to avoid legal proceedings, etc.
As the Inland Revenue slightly relaxed the filing and payment dates for 2000 returns (although this did not seem to get through to some Inspectors of Taxes), the issue of the notice on 1 February seems to be precipitate and well out of order. What do readers think?
(Query T15,766) – Crushed.
'Crushed' seems to have become a little confused. But this may be understandable in view of the misinformation concerning the apparent extension to the tax return filing date. It should be stated up front that the payment date was never extended. Tax due on 31 January 2001 will be subject to interest charges if it was received on or after 1 February 2001. As a result, the issue of a notice SA501 cannot be said to be precipitous if a tax office was aware of the amount outstanding on that date. Over the past five years, the Inland Revenue has sought to toughen up its image as a benign creditor and practitioners should actively encourage their clients to pay their tax on time. From personal experience, I know that it is now much harder to arrange settlement periods than it ever was previously and we must therefore ensure that our clients are re-educated to the new(ish) ways of working.
Two further points are worth making. First, anyone with a 2002 diary will be aware that 31 January 2002 falls on a Thursday. So even applying the current Steeden v Carver extension gives taxpayers until Monday 4 February (and advisers a crucial additional weekend).
More importantly, however, the extension is only relevant for the purposes of penalties under section 93, Taxes Management Act 1970. For enquiries, the window of opportunity is provided by ibid., section 9A(2). That considers the actual date on which a tax return is delivered. A 2000 return delivered on 31 January 2001 may be enquired into at any time up to 30 January 2002, but a return delivered on 1 February 2001 can be enquired into at any time up to 30 April 2002. – Kalonymous.
If a client knows tax is due on a particular date, why should he expect additional credit simply because in the past the Revenue was less efficient at chasing debtors? We all have clients who are slow in paying their tax, or perhaps have always wanted to pay over 2 to 3 months. At a recent meeting, the Revenue indicated that such arrangements, which might have been agreed in the past, can no longer be assumed. The view of Inspectors of my acquaintance seems to be that the profit was earned at least 10 months ago so the taxpayer has had ample time to provide for the tax.
The Collector of Taxes no longer allows the 'traditional' 14-21 days grace before seeking to recover tax, especially in those cases where taxpayers have been slow to pay in the past. This year two clients were telephoned by the Revenue by 7 February seeking unpaid tax and wanting to make arrangements to call. In the first case the amount was substantial, in excess of £100,000, and in the second, although the amount was lower – less than £10,000 – the client had a record of taking unagreed time to pay. There would be genuine cause for concern if the Revenue did nothing to remind taxpayers before the end of February and simply collected the 5 per cent surcharge.
The issues of payment and the filing of returns are separate matters. Payment of any tax due is the fundamental priority. Otherwise why should the penalty for a late return only apply when tax is paid late after 31 January? We should not complain if the Revenue wants to be paid what is due. If the client knows the amount due, when it is to be paid, and the method of payment, then we should not be surprised if the person owed the money wants to be paid. We expect clients to settle our fees in accordance with agreed terms! – Rookery.
Editorial note. Whilst I do not dispute the rationale behind 'Rookery's' clinical approach, my view is that human beings are not clockwork machines and a touch of humanity over payment requirements makes the world a better place. I doubt whether readers telephone their clients for instant payment of fees at the moment they become due, and if they try it they might find their client list shrinking.
