Failing to notify HMRC about your taxable income or capital gains can have serious consequences. If you do not inform HMRC by the relevant deadline, you may face penalties and HMRC can go back up to 20 years to conduct an assessment.
Key Points
1. Notification Obligation: You must inform HMRC about any new source of taxable income or capital gain if you need to pay tax on it.
2. Deadline: If you are chargeable to income tax but do not receive a tax return, you must notify HMRC within 6 months of the end of the tax year.
3. Exceptions: This obligation does not apply if all your income is subject to PAYE or sufficient tax has been deducted at source.
Example Scenario
In June 2008, Akash started a gardening business as his sole source of income. He did not notify HMRC and was not sent a tax return. In August 2011, HMRC discovered his business and issued tax returns for 2008-09, 2009-10, and 2010-11. Akash's profits were:
· 2008-09: £10,000
· 2009-10: £20,000
· 2010-11: £30,000
Since Akash did not notify HMRC by the relevant deadlines, he incurred penalties for both 2008-09 and 2009-10.
Penalties
· No penalty is given if no tax is due.
· Full and unprompted disclosure within 12 months of becoming liable can reduce the penalty to zero.
· The penalty depends on the amount of unpaid tax and the taxpayer's behaviour:
For offshore income from Category 2 or 3 territories, penalties increase significantly, with Category 3 inaccuracies potentially attracting penalties up to 200%.
Conclusion
Always notify HMRC of any taxable income or capital gains by the relevant deadline to avoid penalties. Timely and accurate notifications can save you from significant financial repercussions and legal troubles.
If you have questions and would like to discuss your obligations, please book a Discovery Call with us today, we are here to help you.
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