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CHAPTER 15
SELF ASSESSMENT FOR INDIVIDUALS
1. NOTIFICATION OF LIABILITY TO INCOME TAX AND CGT
Individuals who are chargeable to income tax or CGT shall receive a notice to file a return from HMRC.
An individual who does not received a notice to file a return are required to give notice of chargeability
to an Officer of the Revenue and Customs within six months from the end of the tax year i.e. by 5
October 2021 for 2020/21. However notification is not necessary if there is no actual tax liability.
Electronic Return Non-Electronic Return
Later of: Later of:
(a) 31 January after end of tax year (a) 31 October after end of tax year
(b) 3 months after the issue of notice to file a (b) 3 months after the issue of notice to file a return
return NOTE: In case of paper return HMRC will calculate
NOTE: In case of electronic return income tax income tax liability on taxpayer’s behalf if return is
liability is calculated automatically through submitted by the 31 October deadline which is called
online process. self-assessment.
2. PENALTIES FOR LATE FILING OF TAX RETURN
 Tax return Late upto 3 Months: Penalty is £ 100
 Tax return Late by more than 3 Months but upto 6: £100 + (£ 10 per day between 3 months to 6
months)
 Tax return late by more than 6 months but upto 12 months: Penalty is greater of: 5% of Tax
Liability and £300
 Tax return late by more than 12 months
Type of conduct Careless Deliberate not concealed Deliberate and Concealed

PENALTY Greater of: Greater of: Greater of:

 5% of Tax Liability  70% of Tax Liability  100% of Tax Liability
 £300  £300  £300

3. AMMENDMENTS IN TAX RETURN: A return may be amended by HMRC to correct any obvious
error or omission within 9 months after the day on which the return was actually filed.
The taxpayer may amend his return (including the tax calculation) until 2nd 31st January after the end of
the tax year. E.g. 31 January 2025 for 2023/24.
4. DETERMINATIONS OF TAX DUE IF NO RETURN IS FILED: If tax return is not submitted by due
filings date even If notice has received from HMRC. An officer of HMRC may make a determination
of the amounts liable to income tax and CGT tax and there is no appeal against it. Such a
determination can be made within 3 years of filling date and can be replaced with actual self-
assessment.
5. PAYMENT OF INCOME TAX AND CAPITAL GAINS TAX
Normal due Date: the due date to pay tax liabilities (income tax, class 4 NIC and CGT) are 31 January
after the end of the tax year. E.g 31 January 2025 for 2023/24.

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Payment on Account: Payment on account is required if income tax payable in previous year.
DATE PAYMENT
31 January in the tax year and 31 July after the tax year 1st payment on account 2nd payment on account
31 January after the tax year Final Balancing payment
Payment on Account = Relevant Amount x 50%
Relevant Amount = Previous year Income Tax + Previous year Class 4 NIC
Final Balancing Amount: Current year Income Tax payable + Current year Class 4 NIC + Current year CGT
- Current year tax at source - Both Payment on Accounts.

POA is not required:

• If relevant amount of previous year is less than £1000 or
• Tax deducted at source of previous year is ≥80% of previous year income tax liability or
• Expected income tax liability of current year is nil.
6. PENALTIES ON LATE BALANCING PAYMENT OF TAX
PAID Penalty
More than 30 days but Within 6 months after the due date 5%
More than 6 months but not more than 12 months after the due date 10%
More than 12 months after the due date 15%
7. INTEREST ON LATE PAID TAX: Interest is chargeable on late payment @6.5% of both payments on account
and balancing payments. Interest runs from due date till actual date of payment. (Interest Rate will be given in
exam)
8. REPAYMENT INTEREST: 9. KEEPING OF RECORDS:
Interest may be paid by HMRC @ 3% p.a on any All records must be retained until 5 years after the 31 January
overpayment of tax: following the tax year where taxpayer is in business (eg. a sole
(i) It runs from due date of tax or the date trader or partner or letting property).
HMRC actually received the tax till For all other taxpayers (e.g. employees) records must be
(ii) The date of repayment. retained until later of:
a) 1 year after the 31 January following tax year.
b) Date of completion of compliance check
c) The date on which start of compliance check becomes
impossible.
Maximum penalty to each failure to retain records is £3,000 per
tax year.
10. CLAIMS: All claims and elections must be made in a tax return. Time limit for making a claim for Current year
trading loss relief, carry back trading loss relief, early year trading loss relief and rent a room relief is by 31
January which is approximately 22 months after end of tax year. For all other claims time limit is 4 years after
end of tax year.
11. TAX EVASION and TAX AVOIDANCE: Tax evasion is illegal and Tax avoidance is legal way to reduce tax
liability
12. DISCOVERY ASSESSMENTS: If an officer of HMRC discovers an error an assessment may be raised to
recover the tax lost. The normal time limit for discovery assessment is 4 years after the end of the tax year,
but it may be extended to 6 years in case of careless error and 20 years where tax is lost due to deliberate
understatement. Discovery assessment may be appealed against.

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13. PENALTIES FOR ERRORS:
Maximum Penalty: Minimum Penalties: Unprompted disclosure is one made
Types of error Penalty (% of PLR) at a time when HMRC has not discovered, or is not about
Careless 30% to discover error.
Deliberate not concealed 70% Types of error Unprompted Prompted
Deliberate & concealed 100% Careless 0% 15%
Deliberate not concealed 20% 35%
Deliberate and concealed 30% 50%
14. PENALTIES FOR LATE NOTIFICATION: There is a common penalty regime for submission of incorrect
returns (of any tax) late notifications of chargeability of tax or register for tax, including income tax, NICs, CGT,
corporation tax and VAT. Penalties may be reduced if a taxpayer makes unprompted or prompted disclosure.
Maximum Penalty Minimum Penalties:
Types of error (% of PLR) Unprompted (% of PLR) Prompted (% of PLR)
Careless 30% 0% 10% or 20%
Deliberate not concealed 70% 20% 35%
Deliberate not concealed 100% 30% 50%
15. Compliance check enquiries
 Starting compliance check enquiry: HMRC have the right to enquire into the completeness and
accuracy of any self-assessment tax return under their compliance check powers. HMRC do not have
to state a reason for the enquiry and an enquiry can be made even if HMRC calculated the
taxpayer’s tax liability.
• HMRC must give written notice before commencing an enquiry.
• The written notice must be issued within 12 months of the date the return is filed with HMRC.
Compliance check can be started as a result of any of the following.
 A suspicion that income is undeclared
 Deductions being incorrectly claimed
 Other information in HMRC’s possession
 Being part of a random review process.
 During the compliance check enquiry:
HMRC can demand taxpayer to produce Documents, Accounts or any other information required.
The information requested by HMRC should be limited to that connected with the return. An appeal
can be made against the request.
 Completion of compliance check enquiry:
The enquiry ends when HMRC gives written notice that it has been completed. The notice will state
the outcome of the enquiry. The closure notice must include either:
 Confirmation that no amendments are required
 HMRC’s amendments to the self-assessment. The taxpayer has 30 days to appeal against any
amendments by HMRC. The appeal must be in writing.
16. Disputes and appeals:
Disputes between taxpayers and HMRC can be dealt with by an HMRC internal review or by a
Tribunal hearing.

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 Internal reviews: For direct taxes, appeals must first be made to HMRC, which will assign a
‘caseworker’.
For indirect taxes, appeals must be sent directly to the Tax Tribunal, although the taxpayer can
continue to correspond with his caseworker where, for example, there is new information.
At this stage the taxpayer may be offered, or may ask for, an ‘internal review’, which will be
made by an objective HMRC review officer not previously connected with the case. This is a less
costly & effective way to resolve disputes informally, without need for Tribunal hearing. An
appeal to Tax Tribunal cannot be made until any review has ended. The taxpayer must either
accept the review offer, or notify an appeal to the Tax Tribunal within 30 days of being offered the
review; otherwise the appeal will be treated as settled.
HMRC must usually carry out the review within 45 days, or any longer time as agreed with the taxpayer.
The review officer may decide to uphold, vary or withdraw decisions.
After the review conclusion is notified, the taxpayer has 30 days to appeal to the Tax Tribunal.
 Tribunal hearings:
If there is no internal review, or the taxpayer is unhappy with the result of an internal review, the case
may be heard by the Tax Tribunal. The person wishing to make an appeal (the appellant) must send a
notice of appeal to the Tax Tribunal. The Tax Tribunal must then give notice of the appeal to the
respondent (normally HMRC).
The Tax Tribunal is made up of two ‘tiers’:
a) A First Tier Tribunal
b) An Upper Tribunal
The case will be allocated to one of four case ‘tracks’:
(a) Complex cases, which the Tribunal considers will require lengthy or complex evidence or a lengthy
hearing, or involve a complex or important principle or issue, or involves a large amount of money.
Such cases will usually be heard by the Upper Tribunal
(b) Standard cases, heard by the First Tier Tribunal, which have detailed case management and are
subject to a more formal procedure than basic cases
(c) Basic cases, also heard by the First Tier Tribunal, which will usually be disposed of after a hearing,
with minimal exchange of documents before the hearing
(d) Paper cases, dealt with by the First Tier Tribunal, which applies to straightforward matters such as
fixed filing penalties and will usually be dealt with in writing, without a hearing
A decision of the First Tier Tribunal may be appealed to the Upper Tribunal.
Decisions of the Upper Tribunal are binding on the Tribunals and any affected public authorities. A
decision of the Upper Tribunal may be appealed to the Court of Appeal.
17. Dishonest conduct of tax agents:
a) There is a civil penalty of up to £50,000 for dishonest conduct by a tax agent.
b) If the amount of penalty being imposed is exceeding £5,000 HMRC have a right to publish details of
penalised dishonest tax agent.
c) With agreement of tax tribunal HMRC could also access working papers of dishonest agent.

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SELF ASSESSMENT FOR COMPANIES

1. Notification of chargeability:
A company falling within the scope of corporation tax for the first time must notify HMRC within 3
months of start of the accounting period. Failure to notify chargeability to tax within 12 months of the
end of the accounting period will lead to a standard penalty based on a percentage of the tax unpaid 12
months after end of the accounting period.
2. Corporation tax return:
 Notification of chargeability: Company receives a notice of chargeability to corporation tax after
end of Acc. Period and must notify HMRC within 12months from end of accounting period if does
not receive a notice.
 Return: Company’s tax return is filed electronically and must include self-assessment of tax with
their accounts.
The return is due for filling on/or before the later of:
 12 months after the end of the period to which return relates
 3 months after the date on which the notice to file the return is received
Failure to submit the return on time will result in penalty as follows:
Return late by Penalty (1st & 2nd consecutive failure) Penalty (3nd & consecutive failure)
Upto 3 months £100 £500
More than 3 upto 6 months £200 £1000
More than 6 upto 12 months £200 + 10% of tax £1000 + 10% of tax
More than 12 months £200 + 10% of tax £1000 + 10% of tax
3. Payment of tax:
Normal: corporation tax is payable 9 months and one day after the end of each accounting period.
Quarterly Installments: If augmented profit of company exceed corporation threshold of £1500,000.
 Augmented Profit: Taxable total Profit + Dividend from non-Associated companies
 corporation threshold of £1500,000:
Reduction of Corporation threshold of £1500, 000= £1500,000 x Months (if short POA)
No of Associated co. 12
 Short POA: If POA is less than 12 months corporation tax Threshold (i.e £1,500,000) will be reduced.
 Company Acquired During Accounting Period: If a company Acquires ≥51% in any accounting
period. Such a company would not affect CT threshold limit in that accounting period in which it’s
acquired, rather it would from the next accounting period in which acquired.
 Company Sold During Accounting Period: If a company becomes non-associated during any
accounting period it would still be included in connected companies and will effect CT threshold
limit in the accounting period in which its been sold. But it won’t from next accounting period.
 Installments Date: In 4 equal quarterly installments from start of accounting period:
1. By 14th of 7th month 3 Months tax (Corporation tax X 3/CAP months)
2. By 14th of 10th month 3 Months tax (Corporation tax X 3/CAP months)
3. By 14th of 13th month 3 Months tax (Corporation tax X 3/CAP months)
4. By 14th of 16th month Remaining corporation tax

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 Exceptions:
a) Quarterly payments are not required if current profits ≤£10 million and company was not large in
previous year.
b) Quarterly payments are not required if company is large in current year but corporation tax is
≤£10,000
4. Claims: If a company believes it has made an error in a return, an error or mistake claim may be made
within four years from the end of the accounting period. Other claims must be made within four years of
the end of the accounting period unless a different time limit specified.

5. Records: Companies must keep records until the latest of:

 Six years from the end of accounting period
 Date any enquiries are completed
 Date after which enquiries may not be commenced
Failure to keep records can lead to a penalty or up to £3,000 for each accounting period.

6. Determinations and Discovery assessments: If a return is not delivered by the filing date, HMRC
may issue a determination of the tax payable within 3 years of the filing date. There is no appeal
against it.
Discovery assessment: HMRC can raise an assessment within 4 years from the end of the accounting
period; this is extended to 6 years if there is a careless error or 20 years if there is a deliberate error or
failure to notify chargeability to tax.
7. Appeals and Disputes: The company can appeal against amendments to the corporation tax
return. The appeal must be normally be made within 30 days of the amendment and must state the
grounds for appeal. The appeals procedure is as per VAT.
8. Penalties for incorrect returns
 No penalty where a taxpayer simply makes a mistake
 30% unpaid tax where a tax payer fails to take reasonable care.
 70% unpaid tax if error is deliberate.
 100% unpaid tax if deliberate failure with concealment.
Note: Penalty will be reduced where a taxpayer make a disclosure, especially when this is unprompted
by HMRC.

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