Firms are gearing up to the tough new self-assessment tax regime as the fiscal year came to an end on 5 April.
Many firms have been reviewing their most appropriate year end over the past few months. Those that opted for an accounting period ending on 31 March have 10 months – until 31 January – to finalise accounts and allocate profit shares. Individual partners must then pay the tax due or face sanctions.
Firms that chose a period ending 30 April have an extra year in which to finalise their tax matters.
The new system introduces fixed deadlines for the submission of tax returns and the payment of tax, and raises the prospect of stiff penalties for failure to comply. “If you do not get it right, you are going to get hit,” said Nigel Moorland, finance director at Wilde Sapte. “The most difficult thing will be making sure you stick to the timetable.”
Denise Catterall, head of the partnership group at Coopers & Lybrand, warned that, in the past, some firms had adopted a relaxed attitude to their tax, with the result that tax computations for a number of years may not yet have been agreed with the Inland Revenue.
Such firms, she said, face not only the problem of dealing with the current year, but also clearing the backlog.
Catterall said: “It is important that firms bring outstanding tax affairs up-to-date.”
She warned that making a self-assessment without clearing previous years' tax liabilities with the Inland Revenue could mean having to re-do tax returns, which would create an administrative headache.
Some firms said that the change over has been smooth. Alun Morris, managing director at Simmons & Simmons, said that his firm has always operated comfortably within deadlines, preparing accounts within two months of year end, and envisages this continuing.
As efficient systems already exist, the introduction of self-assessment is “no huge deal”. “We will continue dealing with the Inland Revenue in the same way,” he said.