Do you tax or you wait for them to tax

Walking path under the beautiful sakura tree or cherry tree tunnel in Tokyo, Japan

This is a a general reminder of your tax responsibilities. We all do not like the element of tax in our transactions but we do not have a choice.

Do we make provisions for the tax in the transaction or we wait to be reminded to be taxed? 

In the UK, tax payment is regulated by several laws and regulations enforced by HM Revenue and Customs (HMRC). Below are key points regarding tax payment obligations and the consequences of non-compliance, along with relevant statutes and references.

Tax Payment Obligations

  1. Income Tax:
    • Governed by the Income Tax Act 2007 and the Income Tax (Earnings and Pensions) Act 2003.
    • Individuals must pay income tax on their earnings, with the current thresholds and rates specified in the annual Finance Act.
  2. Corporation Tax:
    • Regulated by the Corporation Tax Act 2009.
    • Companies are liable to pay corporation tax on their profits, with submission deadlines and rates detailed in the Finance Act.
  3. Value Added Tax (VAT):
    • Governed by the Value Added Tax Act 1994.
    • Businesses must register for VAT if their taxable turnover exceeds the registration threshold, currently set at £85,000. They must charge VAT on their sales and submit VAT returns.
  4. National Insurance Contributions (NICs):
    • Governed by the Social Security Contributions and Benefits Act 1992.
    • Both employees and employers are required to contribute to National Insurance based on earnings, with specific thresholds and rates outlined in the annual National Insurance regulations.

Consequences of Non-Payment

  1. Penalties and Interest:
    • HMRC can impose penalties for late payment under the Finance Act 2009. For instance, a 5% penalty is charged if tax remains unpaid after 30 days of the due date.
    • Interest may be charged on late payments in accordance with the Finance Act 1988.
  2. Compliance Checks and Audits:
    • HMRC has the authority to conduct compliance checks under the Management Act 1972. Auditors can access records and request information to ensure tax compliance.
  3. Legal Action:
    • Under the Taxes Management Act 1970, HMRC may issue a liability notice to collect tax owed. In severe cases, they can take enforcement action, including charging orders or petitions for bankruptcy.
  4. Criminal Prosecution:
    • Serious tax evasion may lead to criminal charges under the Fraud Act 2006 and the Proceeds of Crime Act 2002. Convictions can result in heavy fines and imprisonment.

References

Importance of Compliance

Compliance with tax laws is essential to avoid penalties and ensure eligibility for public services and benefits. Consulting with tax professionals can aid in understanding specific obligations and maintaining compliance with UK tax law.

So if you do not want to be caught up with the paneities and warnings that avoidance and delay of tax payment bring about do not transact with out considering your tax obligations.

Get your own tax adviser to confidently manage the tax implications in a transaction and ensure that you don’t bear the bulk of the tax burden unless the adviser or partner is obligated to handle it.

LAW AND FINANCE