Filing a tax return is one of the most crucial annual financial responsibilities of a taxpayer in the United Kingdom. It is imperative that every business as well as individual in the United Kingdom undertakes this responsibility in time and abide by the legal obligations. Unfortunately, despite all the importance that is associated with the issue of tax return, there are instances when businesses and individuals fail to file the tax return by the deadline, or do not file it at all.
It goes without saying that failure to file a tax return in time, or not filing it at all invites unpleasant consequences. That’s the reason, any professional tax advisor in Barkham will suggest filing a tax return in time. On this page, we discuss the consequences and associated issues of not reporting a tax liability.
Legal Consequences
One of the immediate and the most severe consequences that follow the failure come from the legal front. The deadline set by HMRC for tax returns is usually the 31st day of January every year. Failing this deadline invites an initial fixed penalty, followed by daily penalties if the non-compliance persists.
Financial Consequences
In addition to the legal ramifications of missing the deadline, not filing a tax return might have severe financial repercussions. As per the HMRC rules, interest may be assessed on the overdue taxes from the date of the deadline until the entire amount is paid. For both people and businesses, this might result in a significant rise in the overall tax due, which can be pretty costly.
Damage to Credit Rating
The credit rating of the individual or the business may be indirectly impacted by nonpayment of taxes. Outstanding tax obligations may result in legal actions such as county court judgements (CCJs), which are noted on an individual’s credit records, even though HMRC does not directly report to credit agencies. Nevertheless, it has a serious negative impact on the credit rating.
Apart from these primary consequences, other consequences include loss of right to pay taxes, a negative impact on benefits and credit, and increased scrutiny from the HMRC. That is the reason, every professional Tax advisor in Swallowfield will emphasise on timely tax return submission to evade these consequences.
How does HMRC scrutinise and investigate tax evasion?
It goes without saying that HMRC may become more suspicious if tax filing requirements are not met.The financial affairs of an individual or a business may be the subject of an inquiry by the tax authorities if there are irregularities. They will start an investigation as the suspicion of possible tax evasion rises.
Whenever the HMRC Fraud Team finds any questionable activity related to the accounts or has observed an error with the tax return they will commence an investigation for tax fraud. To assist HMRC in their investigation of tax evasion, they employ a database called “Connect,” which essentially links the dots to determine whether the individual or the business in question is claiming less income than they appear to be making.
At times, “Discovery assessments” are issued by the HMRC. As the name implies, they are issued as and when HMRC “discovers” a taxpayer owes taxes that HMRC hasn’t been notified of.
Some insights about Corporation Taxes (CT)
In the case of Corporation Taxes, there are certain nitty-gritties to discuss. When a business has suffered losses in previous years, the regulations permit it to lower the CT payable on current earnings. However, until the accounts for the loss-making period have been produced and a matching claim for relief has been lodged, losses incurred in the current year cannot be offset against the CT bill of the preceding year. Here, a qualified Tax advisor in Spencers Wood will be able to help the business manage the technicalities.
So you see, this writing explains why it is so important to have a reputable accounting firm at your side, no matter whether it’s for business accounts or personal accounts. Biz Accounting Solutions Ltd ought to be the best accounting solution you can put stakes in.
