World's most taxing task

By THIS IS MONEY
Updated:

 

Nine million taxpayers will have heard an unwelcome thud when their tax returns hit their doormats. And that's just the start of the nightmare.

This year, more than 800,000 people were fined £100 each because they did not get their 1998-99 returns in by 31 January. If you don't get your return in by the same date next year, you, too, will be fined £100.

Since self-assessment started in the 1996-97 tax year, a total of 3.4 million people have missed the deadline. And as well as being fined for late returns, tardy taxpayers end up being charged interest on any unpaid tax.

Some will have been late because they're just absentminded. But many will be fined because they've underestimated how complicated these forms are.

About half of the nine million taxpayers sent returns will attempt to handle the form themselves. But many will get it wrong.

The basic tax return may be only eight pages long but most taxpayers will be sent, or have to request, supplementary pages to cover such questions as employment, self-employment or capital gains.

And even on the basic release, there are more than 130 boxes to fill in. The accompanying guide, meant to help taxpayers through the complexities of the form, runs to more than 30 pages.

Mike Warburton, of Grant Thornton, says: 'Add on the calculation and helpsheets, then you have 95 pages to wade through. If you're employed and have made capital gains then you've 267 pages to read.' The system is coming in for increased criticism from taxation professionals.

A survey by the Association of Chartered Certified Accountants found 99% of its members were having problems because of Inland Revenue mistakes. It discovered that nearly two-thirds of its members had seen clients fined for late returns, even though the forms had not been late.

Few were satisfied with the system and many demanded that the system of fining tardy taxpayers should be changed. John Whiting, of accountants PricewaterhouseCoopers, says: 'All American taxpayers have to fill in returns, whereas here just nine million out of the 30 million taxpayers do so. But the American system is fairly simple. You can get someone else to fill it in for you for next to nothing.'

Indeed, in the tax-return season, cut-price tax services set up on every block. Because it's so easy and cheap to get someone else to do the hard work for you, most Americans don't do their own returns.

Australia and New Zealand have more user-friendly tax systems, although they include harsh penalties and all taxpayers must submit forms. But the New Zealand form - based on the Australian model, stretches to just four pages, one of which is for your name and address.

In the main European countries, the taxation systems have their good and bad points. Both Italy and Germany have PAYE.

The Italian system has a tax year end date of 31 December and a filing date for returns of 30 June, two months less than the UK system. But it has independent taxation and allows electronic filing.

The German system allows nine months from the end of the tax year to the final filing date but it has a complex system of dates by which tax must be paid.

File your tax return online

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