Enquiry Window Of HMRC
HMRC enquiry window runs for the next 12 months from the date the tax return is submitted. Similar is the case with a voluntary return. In case of late returns, the inquiry window is extended by another quarter, following the first anniversary of the filing date.
A taxpayer is permitted to make amendments to his/her tax return up to 12 months from the date of submission. Any amendments to the return will not extend the inquiry period any further.
HMRC can however put up a ‘discovery assessment’ to fact-find further information that was not available to them when the original tax return was submitted. The time limit for a discovery assessment is 6 years in the case of carelessness and 20 years in case of a conscious effort to evade tax.
Fake HMRC Emails, Letters, Text Messages
Beware of the scammers! Sometimes you may receive emails for a tax refund that may be sent by scammers. With the advancement in technology, cyber-crimes have also evolved. If you get into their trap they may steal your confidential information like your contacts, address and your account details, etc.
You can double-check any messages received from the HMRC account and online record to confirm their authenticity. The personal tax account provides the users the aid to view a history of tax filings, payments, and liabilities.
Tax Evasion And Its Examples
Tax evasion is illegal and another way of avoiding such tax you are rightfully liable to pay. This is a criminal offence and may lead to significant financial penalties if they come to the notice of HMRC. Our recommendation would be to file your financial information and tax returns correctly and accurately. Following are some of the instances of tax evasion:
- Manipulating accounts, statements or deliberately showing a loss, thereby avoiding a considerable amount of tax.
- Failure to fully disclose all of your income, through being a landlord, sole trader, owner of a company, and beneficiary of a trust.
- Fall in income, increase in costs, unusual fluctuations in business assets and transactions.
- Masking the income through various schemes in which employment earnings are routed through an offshore entity, located in a low tax jurisdiction.
- Misrepresenting the remuneration scheme, in which pay is directed through an umbrella company in the form of a loan prevents PAYE tax.
In general, a UK resident is subjected to tax on his worldwide income, for which explicit rules are in place to determine his status for tax. For companies, the corporation tax liability is defined by the central management and the region of ultimate control. For instance, a company owned and managed by a UK tax resident will be liable to the UK tax regime regardless of the place where it is incorporated.
The penalty for tax evasion and errors or omissions in the tax return is calculated as a percentage of the tax lost. The amount of levy of liability depends on several factors, for example, whether the disclosure of incorrect information or inaccurate return is done voluntarily or HMRC discovers the error. Other ways in which the penalty is determined are:
- Whether the disclosure is prompted or unprompted.
- A voluntary disclosure will reduce the chance of a high penalty.
- In case of errors and omissions, HMRC encourages prompt and complete disclosure. HMRC may also reduce the penalty in case of quick and thorough disclosure.
- A misstatement highlighted within 12 months of the filing date may attract a lower penalty. A higher rate may apply where the omission is more than 12 months old.
- Whether the misstatement results from carelessness or a conscious effort to evade the tax.
- A conscious effort to conceal the evasion could result in a more significant penalty.