A new amnesty for tax truants

A new campaign offers easy filing and reduced penalties if you submit outstanding tax returns by 15 October.

Each year, around 10 million UK residents receive an SA100 form through the post, otherwise known as an annual tax return.%VIRTUAL-SkimlinksPromo%
Under the current system (known as self-assessment), you are legally obliged to complete a tax reform if you receive one. This is the case even if you think it's not relevant to you and you don't owe the taxman a penny. Since the 2011/12 tax year, the only way out is to ask for an SA100 to be withdrawn by calling the taxman on 0845 900 0444.

What's more, the fines for not submitting your tax return and paying your tax bill on time are both automatic and steep. Hence, having an overdue SA100 can quickly turn into a bureaucratic and financial nightmare.

Tax terrors
Paper tax returns must be filed by 31 October after the end of the previous tax year (on 5 April). File online and this deadline is extended to 31 January of the following year. Thus, if you received a 2012/13 tax return last spring, then this must be filed and any tax paid no later than 31 January 2014.

If you file late, the penalties soon mount up and, since April 2011, these apply even if you don't owe a penny in tax.

If you miss the paper filing date of 31 October or the online deadline of 31 January, then you are automatically fined £100. File three months late or more and an automatic daily penalty of £10 applies, up to a maximum of £900. File or pay more than six months late and a further fine applies: £300 or 5% of the tax owing, whichever is greater. File 12 months late and a similar fine applies.

In addition, you'll be charged interest on any unpaid tax overdue, plus an additional levy. This levy is 5% after 30 days, another 5% after six months and a further 5% after 12 months. Finally, persistent or long-standing offenders can be fined a penalty of up to 100% of the tax due, thus doubling their bill.

In summary, submit a tax return more than a year late and you could be hit by fines totalling £1,600 -- even if you owe no tax whatsoever.

An amnesty for late tax returns
What happens if you have several outstanding tax returns and are worried about filing them? After all, this could mean paying hundreds or even thousands of pounds in fines and interest. The good news is that HM Revenue & Customs (HMRC) has launched a brand-new initiative aimed at getting paperwork-shy Brits to file outstanding tax returns.

From this month until Tuesday, 15 October, HMRC is running a tax amnesty called My Tax Return Catch Up. This campaign allows taxpayers to bring their tax affairs up to date by submitting tax returns for any previous years up to 2011/12. By taking part, you will receive the best terms available for late payment from HMRC.

Here's how My Tax Return Catch Up (MTRCU) works:
  1. First, you must tell HMRC that you wish to join the campaign. You can do this by completing and returning this notification form or registering online by the 15 October deadline. Alternatively, you can call the dedicated MTRCU helpline on 0845 601 8818 (open Monday to Friday, 9am to 5pm).
  2. Next, you must complete and submit all your outstanding returns -- up to and including the 2011/12 tax year -- by the deadline. In most cases, the simplest way to do this is to file online.
  3. Lastly, you must pay any income tax and National Insurance contributions that you owe. If you're lucky, then you can reclaim any repayment due.

If you can't pay the full amount of tax due, then MTRCU advisers will help you to set up a payment plan to clear your arrears. To make this task easier, always quote your 10-character Unique Taxpayer Reference (UTR) in all correspondence with (and payments sent to) HMRC.

What's in it for you?
By taking advantage of this tax amnesty, HMRC states that you can bring your tax affairs up to date in a 'quick and straightforward way'. Also, you have use of a dedicated helpline for advice.

Most importantly, joining MTRCU 'increases your chances of saving a higher penalty based on behaviour'. In other words, it stops the rot and may prevent harsher treatment in future, up to and including court action.

In summary, think of this campaign as a juicy carrot before HMRC starts wielding a big stick. Therefore, if you think you would benefit from joining My Tax Return Catch Up, then I'd urge you to do so without delay.

Celebrities who fell foul of the tax system
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A new amnesty for tax truants

She may have won five Grammys and sold more than 19 million copies of her solo album, but that didn't save her from being jailed for failure to pay her taxes. She was sentenced to three months in jail, then three months confined to her home, for failing to pay tax on £1.2 of earnings between 2005 and 2007.

Hill told the court that she had meant to pay the taxes, but she had withdrawn from public life in order to raise her six children, so had been unable to pay the tax bill. She has since paid the money back, but must still spend three months at Danbury open prison.

Dolce and Gabanna were given jail sentences in June for failing to declare 1 billion euros of income. They were sentenced to a year and eight months in jail, but said they would appeal.

Heidi Fleiss was sentenced in 1997 to seven years in prison for failing to pay tax on profits from the prostitution ring she ran. She eventually served 20 months in jail, and 10 months in a halfway house - and was released in 1999.

Judy Garland was wrong-footed by a tax bill in 1967, she had her home repossessed by the IRS and was forced to live in a hotel. She died two years later.

Richard Hatch is a relatively minor celebrity, but makes the list for sheer stupidity. He was the first winner of Survivor, and its £1 million prize, but failed to declare it to the tax man. He was sentenced to jail and home confinement for more than three years.

The rapper and actor admitted he hadn't paid tax on his earnings between 2004 and 2006. He was ordered to repay $1 million and spend two years in prison. He is actually serving it concurrently with a New York sentence for possession of a weapon.

Lester Piggott was sentenced to three years in jail in 1997, after failing to declare income to the taxman. At the time it was thought to be Britain's longest-ever sentence for personal tax fraud.

Richard Pryor served 10 days in jail in 1974 for failing to pay his taxes. He told the judge that he had simply forgotten about it.

Wesley Snipes owed an impressive $17 million in tax after failing to file returns from 1999 to 2004, and was jailed for three years. On release he still had to pay the cash back.

Sophia Loren was sentenced to 30 days in prison in 1982 for failing to pay tax. She served 17 days in a Naples jail.

Nicholas Cage was never given any jail time, but after failing to pay his taxes, he was ordered to pay more than $14 million in back tax and charges. He blamed his ex-manager and accountant, and has been selling his assets to pay the taxman back.

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