The time's up for your tax return

The deadline is upon us for filling in the self-assessment form, says Steve Lodge

Up to 5 million people are set to miss the first deadline for fill-ing in the new-style tax returns, so opening them to the risk of having to pay interest on what they owe unless they take on the additional burden of working out their tax bill themselves.

So far, fewer than 3 million people who have been sent the forms have returned them, and more than 100,000 of those have had to be sent back because they were not filled in properly.

The forms relate to the 1996-97 tax year ending on 5 April and are the first annual returns under the new self-assessment system, which is a bit of a misnomer in that most people are still likely to rely on the Inland Revenue to calculate their ultimate tax bill.

The new system does not affect everyone as most people will continue to pay all their tax under the pay-as-you-earn (Paye) system, and non- taxpayers need not worry either.

But 8 million people who have earnings where the full amount of tax is not deducted at source, including the self-employed and most higher-rate taxpayers with their savings, should have been sent the return earlier this year.

The end of this month, 30 September, is the deadline for returning the form if you want the Inland Revenue to guarantee to calculate your tax bill in time for 31 January, which is the main payment date under the new system.

Employees, as opposed to the self-employed or retired, who pay most of their tax under the Paye system and expect any additional tax to amount to less than pounds 1,000 have a particular incentive in meeting the deadline. If they do so, the Revenue will allow the extra tax to be collected on a monthly basis from next April under the Paye system. Compared with paying all the tax due by 31 January, this amounts to an interest-free loan.

31 January is the real deadline under the new system. Fail to get your tax return back by this date and there is an automatic pounds 100 fine and you will be charged interest at 9.5 per cent on any owed tax not paid by then (unless it is being collected under Paye, as agreed).

The Revenue describes the new system as a "simplification" of the old and says it has received more of the completed returns than it had expected at this stage. Nevertheless, many taxpayers will feel daunted by the forms, which comprise a basic eight-page return with supplementary pages that should reflect individual circumstances.

As well as the 6 per cent of completed returns that have had to be sent back to taxpayers

for one reason or another (and sometimes it is simply because they have not been signed), a further 40 per cent have contained mistakes that the Revenue has had to correct.

The Tax Team, a high-street chain of tax advisers that has a fixed-fee tax return service starting at pounds 75, says that one in 1,000 self-assessment taxpayers will also face a random audit (investigation) and that the new system does raise the prospect of more fines and penalties than previously for getting things wrong or missing deadlines.

Nevertheless, the Revenue insists that anyone who did not use an accountant or tax adviser under the old system should not need one now, and some accountants and advisers have been accused of scaremongering to drum up business.

The Revenue has set up a special helpline that will give anonymous advice. It is open in the evenings and at weekends (see below for details), while during weekdays taxpayers can contact their local tax office. Some tax offices have even run special surgeries in libraries and the like.

Paula Higgleton, tax manager at Moores Rowland, a firm of chartered accountants, recommends that taxpayers approach their return in two sittings.

They should not delay the first, which should be to check they have been sent the right supplementary pages and to make a list of all the information and paperwork they need to complete the form.

If they have not got the right pages or information this may take some time to collate, hence the importance of not delaying this first step. Taxpayers should then have their second sitting to complete the form when they have everything.

For anyone who has received a return the problem is not going to go away. Indeed, leave it long enough and you face increasingly severe penalties.

But people who have not received a return but who have taxable income or gains from the last tax year cannot afford to relax either. 5 October (six months after the end of the last tax year) is the deadline for notifying the Revenue that it needs to issue a tax return. If you fail to do so, and the Revenue discovers the unpaid tax, you face unspecified penalties.

q The Revenue's tax return helpline is open between 4.30pm and 10pm on weekdays, 8am to 10pm at weekends. Call 0345 000444.