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Last Updated: Wednesday, 3 July, 2002, 13:12 GMT 14:12 UK
Self assessment penalties and enquiries
By John Whiting,
Tax partner PricewaterhouseCoopers

The end of January marks the end of the annual self-assessment panic.

All being well, by that date you will have submitted your tax return well before the 31 January deadline, and paid the tax which was due.

Tax return
So now you think you can put your feet up and not worry about the tax office for another year?

Well maybe. But it's important to remember that, under self assessment, getting the return and the cash in to the Revenue is only really part of the story.

What's this 100 penalty??

It's just possible that you have received a penalty notice from the Revenue.

This will claim that the tax office has not received your tax return by the 31 January deadline, and that there is a fixed penalty of 100.

If you did get the return in on time, hopefully you'll be able to write back and say that "I sent in on such-and-such a date" or that "I took it to the X tax office on..." and that should be an end to it.

If you did miss the 31 January deadline, you may have a "reasonable excuse".

It's not enough to have had a cold on the day you meant to drop your form in. You have to establish that something really did prevent you for some time from completing your return, a fire in which you lost all your accounting records would do the trick.

It's also possible that you won't have to pay the full 100. If your tax bill is less than 100 then you only have to pay an amount equal to the value of your bill.

But, frankly the best way of getting out of the penalty is to beat that deadline.

If necessary, estimate any missing figures, explain why you don't have the exact numbers in the white space on the return and get it in!

No-one expects the Spanish Inquisition!

Another thing you might find landing on your doormat is a letter from the Inspector saying:

"I am writing to tell you that I intend to make enquiries into your 2003/04 return and have written to your agent to ask for the information I need. I enclose a copy of our Code of Practice relating to enquiries, which I hope you will find helpful. It explains your rights and obligations. Please read it carefully."

Is this something to be worried about?

Hopefully not. A number of these "enquiries" or "tax audits" has been picked entirely at random by the Revenue's central computer.

There is absolutely nothing sinister about them - the idea is to make random checks to see how well the system is working.

The great majority of the rest of the enquiries will be started because the inspector has found some part of a tax return which he cannot understand. This may be born of something as innocuous as your pension premium claim, or the base cost you gave for a capital gains disposal.

These are sometimes termed "aspect" enquiries - they just want to check an aspect of your return.

A quick exchange of correspondence should solve the matter.

The problem is, of course, that the same system also has to deal with serious investigations involving income omitted from returns.

So a few enquiry letters could be the prelude to a major investigation.

The important thing is not to worry. But do get help from a professionally qualified tax adviser if things seem to be escalating.

If the inspector merely has a few routine questions, he will do his best to get it all over with as quickly as possible.

And if he drags his heels, and keeps on asking more and more seemingly pointless questions, you do have the right to go to the appeal commissioners.

They will insist that the inspector either stops his enquiries or justifies why he needs to go further - and the inspector cannot argue with their decision.

Self assessment basics
21 Sep 01 |  Tax
January tax deadline looms
21 Sep 01 |  Tax


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