Newsletter Summer 2008

Summer 2008 Newsletter

Content

After U, Gordon?

Ups And Downs

Gift Horse

What A Relief!

Second Thoughts?

Last One Out...

Penalty Shoot-Out

Ain't Necessarily So

Going, Going, Gone

Papers In Order?

Death And Taxes

Passing The Buck

Hire Higher

Back Taxes, Taxes Back

Options Open

Extortion?

Sick Note

Cats And Dogs

Old-Fashioned Money

I Thee Endow?

Mother's Rights

Countdown

Nowhere To Hide

Extortion?

What would you call a loan shark who charged you 15% interest for being a day late repaying a loan? "Taxman", perhaps. If you are regularly late paying the VAT due on your quarterly returns, you will become liable to default surcharge. This starts at 2%, but then it goes up with each late payment until it hits 15%. That's charged on the whole amount outstanding even if it's just a day late arriving - an annual percentage rate of 5,475%. You then keep paying that until you find a cheaper source of finance and manage to pay HMRC on time. Default surcharge can't be reduced for mitigating circumstances, although it can be cancelled altogether if you have a reasonable excuse.

There are more arguments about defaults and excuses for them than any other type of tax case. One rule which causes confusion is the extra 7 days that Customs give you to file your return and make your payment if you transfer the money electronically. The first problem is that they have to have the money cleared into their bank account by that 7th day - if that's a Saturday, you'll have to organise a BACS or CHAPS transfer to get the money to them by the Friday. The next working day, Monday, is too late.

Several cases recently showed what happens when Easter falls in early April, as it did in 2007. People realised at the last minute - or didn't - that the money would have to get to HMRC by Thursday, not by Friday, because Good Friday is a bank holiday. The Appeals Tribunal has been sympathetic to some, where there has been evidence that they tried to deal with the problem and failed. Just failing to notice is not generally an excuse.

If you are in the surcharge regime, or you have received any notification of surcharge liability from HMRC, it's very important to deal with it. Almost anything else is cheaper. We will be happy to advise you on how to get rid of surcharges.