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HMRC internal manual

Self Assessment: the legal framework

Self Assessment Tax Returns: Self Assessment

All tax returns include a ‘self assessment’ of the tax due

Section 9(1)

Taxpayers are required to include an assessment in their tax return showing the tax due for the tax year to which the return relates. This self assessment is based on the information contained in the tax return and will create a legal charge to tax.

The self assessment should take into account any relief or allowance for which a claim is made in the tax return and any income tax deducted at source.

A self assessment is required even though the tax due may in fact be ‘nil’ (for example, in any case in which the taxpayer’s total chargeable income for the year is less than the personal allowances due for that year).

Similarly, a self assessment is required even though the taxpayer may be entitled to a net repayment of tax (for example, a repayment of tax deducted at source).

If the taxpayer files their tax return early enough HMRC will assist in the calculation of the tax due

Section 9(2)

The requirement to include the self assessment with the tax return applies to all taxpayers except those who submit the information section of the return in sufficient time for HMRC to calculate the tax due.

The special time limits for filing the information section of the paper tax return are:

  • 31 October following the tax year to which the tax return relates
  • where the tax return is issued after 31 July following the tax year to which the return relates two months from the date of issue of the return.

It is essential that all taxpayers comply with the filing date rules at Section 8(1D) (SALF203 There are fixed time limits for filing a tax return) whether they calculate the tax due themselves or whether the calculation is made by HMRC. This is because those filing dates are directly linked to the due dates for the payment of the tax due.

The time limits at Section 9(2) are set to ensure that any tax return filed without a tax computation is submitted early enough for HMRC to:

  • calculate the tax due, and
  • issue a copy of the tax calculation to the taxpayer before the due date for payment of the tax.

Where, exceptionally, HMRC fail to notify the taxpayer of the tax due in time for the correct tax to be paid at the due date for payment, even though the taxpayer filed a tax return within the time limit for HMRC assistance, any interest or surcharge arising in the period of delay attributable to HMRC will be waived.

Filing date for taxpayers whose additional tax liabilities are collected through PAYE

Taxpayers within the PAYE system can have additional tax liabilities, totalling less than £2,000, collected through PAYE by a coding adjustment, rather than by direct payment. Returns must be submitted early enough to ensure sufficient time for the coding adjustment to be made.

If a return is submitted electronically before 31 December following the end of that tax year we will consider whether the underpayment can be coded.

If a paper return is submitted by 31 October following the end of that tax year we will consider whether the underpayment can be coded. (If the return is received after 31 October but processed before 31 December we will also try to collect the underpayment through a coding adjustment).

HMRC tax calculations

Section 9(3)

Although a taxpayer may specifically request that HMRC calculate the tax due a formal request is not actually necessary. If a tax return is filed without a self assessment, and it is filed within the specified time limits for HMRC calculations, an officer of the Board is automatically required to calculate the tax due using the information in the tax return and to issue a copy of the tax calculation to the taxpayer.

The process of HMRC calculation does not require any officer of the Board to make a judgement on the accuracy of the figures contained in the information section of the tax return. It is simply a question of taking the information provided by the taxpayer and using that information in the appropriate tax calculations.

It may be that a tax return without a tax calculation is submitted outside the required time limits. In strictness, such a tax return is unsatisfactory. Even where in practice HMRC does the calculation in such cases, they will not guarantee to notify the taxpayer of any tax due before the due date. Interest and surcharge are payable on any tax paid late.

A calculation made by HMRC is treated as if it were a self assessment made by the taxpayer.

Section 9(3A)

Any calculation made by HMRC, rather than the taxpayer, is treated as if it were a self assessment for all other purposes.

Corrections of errors or omissions in the tax return

Section 9ZB

An officer of the Board may amend a tax return to correct any ‘obvious errors or omissions in the return’ at any time during the nine months following the date on which the completed tax return was filed with HMRC. Amendments may be made to correct arithmetic mistakes, or errors of principle, or other errors. An officer may also amend the return to correct ‘anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer’. These corrections are made whether they increase or reduce the tax due. Where there is an increase in tax, penalties can arise if the inaccuracy in the tax return is shown to be careless or deliberate.

If an error is not corrected within this nine-month period it cannot be corrected by HMRC unless a formal enquiry is opened into the tax return (see SALF400).

Where a taxpayer disagrees with a correction made by an officer of the Board he or she is entitled to reject the correction by notice within 30 days of receiving the correction. In such cases HMRC could only pursue the matter by means of a formal enquiry.

Section 9ZA

Similarly, the taxpayer may wish to amend the information originally entered in the tax return (for example to replace a provisional figure with a final accurate amount), and to make corresponding amendments to the self assessment. The taxpayer is allowed to notify and make any such amendments at any time from sending in the return up to 12 months following the statutory filing date. For this purpose, the statutory filing date is the later of the 31 January filing date for electronic returns and three months from the date the return was issued.

Although the time limit for corrections by HMRC is set by the actual date on which the return is filed, the time limit for amendments by the taxpayer is set by the statutory filing date as defined in the paragraph above. So if the tax return is filed late the time in which the taxpayer can make amendments is correspondingly reduced.

If a tax return is under enquiry the taxpayer can still amend his or her tax return within the normal time limit as above, but the amendment will not take effect until the enquiry is completed (S9B).

Where an error is discovered after the time limit for a correction, or an amendment, has passed, action may nonetheless be taken to correct it. Where the error has resulted in an overpayment of tax it may be covered by a claim to overpayment relief (see Error or mistake relief claims at SALF206). Where the error has resulted in an underpayment of tax it may be open to HMRC either to commence an enquiry, or make a discovery assessment, depending on when the error is discovered (see SALF400). Where taxpayers become aware of an underpayment after the expiry of the time limit for amendments, they should notify HMRC so that corrective action may be taken accordingly.

Other rules

There is a requirement to make a declaration that the tax return is to the best of the taxpayer’s knowledge ‘correct and complete’ (TMA70/S8 (2)).

There are general rules regarding the extent of the information required in the tax return. The tax return may require information relating to different periods, different sources of income, and to more than one person (TMA70/S8 (3) & (4)).