Tax Tips: Tips to Help You Keep on Top of Your Tax Return Records

Peninsula Team

May 20 2009

The Peninsula TaxWise Advice Service is on hand to help guide employers through the tax returns process. For help, just call them on 01455 852555.

In the last few weeks HMRC have issued approximately 9 million self assessment returns to individuals and partnerships which have to be completed and submitted by the 31 January 2010

Under new rules recently introduced, HMRC will penalise incorrect returns which result in an underpayment of tax. The level of which will be decided according to the seriousness of the behaviour that produced the error.

The size of penalty levied if HMRC discover an error will in a large part be based on the level of care taken by the taxpayer to ensure a correct return was submitted. If steps had not be taken to maintain full and correct records, the level of penalty will increase.

If a penalty arises because of a lack of reasonable care, the level of the penalty will depend on the amount of the extra tax due and the reasons for the error.

  • If the error is careless, the penalty will be between 0 and 30% of the extra tax due.
  • If the error is deliberate, the penalty will be between 20 and 70% of the extra tax due.
  • If the error is deliberate and concealed, the penalty will be between 30 and 70% of the extra tax due.

It is essential therefore that every individual and business can demonstrate to HMRC that they have take reasonable care in ensuring a correct return has been submitted.

The basic minimum requirement expected of any business or personal taxpayer is that they have a system of record keeping to ensure that the correct income and expenditure is declared on the return for tax purposes.

For those taxpayers who are employed HMRC expect you to retain;

  • your P45 - keep part 1A of this form
  • your P60 - pay and tax details for the tax year
  • details of your expenses and benefits, such as a company car or health insurance - your employer will give you these using form P11D
  • your payslips or pay statements
  • certificates for any Taxed Award Schemes
  • information about any redundancy or termination payment

Taxpayers who are self employed should retain the following basic records;

  • cash book
  • order notes and invoices
  • copy sales invoices
  • details of any other business income received
  • details of any private money brought into the business
  • till rolls or other form of electronic record of sales
  • details of any other income
  • any cash taken out of the till to pay small business expenses
  • bills and invoices for purchases and expenses
  • a record of stock on hand at the end of the year
  • all bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions

All this information will be required in completing your Self Assessment return. You'll need to keep certain records and hold on to them for several years so that you can back up the information you put on your return.

Income from property

If you get income from letting out a property, you'll need to keep details of the rents you've received and the expenses you've paid.

Interest, dividends or other income from UK savings, investments or trusts

You are also required to retain details of all investment income received in the year and this could include;

  • bank and building society statements or passbooks
  • statements of interest and any other income you've received from your savings and investments
  • tax deduction certificates supplied by your bank
  • dividend vouchers received from UK companies
  • other vouchers such as scrip dividend vouchers
  • unit trust tax vouchers
  • life insurance chargeable event certificates
  • details of any income you receive from a trust

It is essential for all those in businesses to seek professional help if required to ensure you take reasonable care in keeping adequate records to enable the preparation and submission of an accurate return.

The Peninsula TaxWise Advice Service is on hand to help guide employers through the tax returns process. For help, just call them on 01455 852555.

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