SALF210 - Self Assessment Tax Returns: other taxpayer obligations: requirement to notify chargeability

Taxpayers who do not receive a tax return are required to notify chargeability to income tax or capital gains tax

Section 7(1)

Self Assessment is a system for dealing with tax returns and claims. It applies to taxpayers who are identified as requiring a tax return and who are issued with a notice to file or a paper self assessment tax return incorporating a notice to file. It also applies to people who make a claim outside a tax return.

HMRC is not always able to identify who needs a tax return so there is a requirement to notify chargeability. Any person who has not been required to complete a tax return, but who nonetheless has profits or chargeable gains on which tax is due must notify an officer of the Board that they are chargeable to tax.

Time limit for notification

The time limit for notifying chargeability is six months from the end of the tax year in which the tax liability arises. Notification must be received on or before 5 October.

The six-month time limit ensures that the taxpayer can be sent a tax return in sufficient time to complete it within the normal return cycle for the year. There is a separate requirement (and a separate penalty for failure) to notify HMRC for the purposes of National Insurance (Regulation 87A of the Social Security (Contributions) Regulations 2001 - SI 2001/1004).

Exceptions to the requirement to notify chargeability

Section 7(3) to (7)

There are exceptions to this requirement. These are where the taxpayer has no chargeable gains (or such gains as there are do not exceed the annual exempt amount), and either:

• has no net liability to income tax for the year, or
• has had sufficient tax deducted at source to meet the net income tax liability for the year.

Taxation of coronavirus support payments

New measures introduced in (July 2020) ensure that support payments made to businesses, employers and individuals (including partners of partnerships) affected by the coronavirus crisis are taxable. Payments are treated as income where the business is within the scope of either Income Tax or Corporation Tax.

Not everyone who receives a support payment is required to notify again.

If a person receives a support payment they are not entitled to, they are required to notify chargeability. The obligation remains whether or not the person has received a notice to file a return, or they have received a notice to file and it has been withdrawn.

Notification period

The time limit for notification (the ‘notification period’) starts on the day on which the income tax became chargeable and ends on the later of— (a) 20 October 2020, or (b) the 90th day after the day on which the income tax became chargeable.

One partner within a firm can notify chargeability in respect of excessive support payments received.

Penalties for failure to notify chargeability

Schedule 41 FA 2008

The taxpayer is liable to a financial penalty if notification is not made within the six-month time limit. The maximum penalty is the net amount of tax due, but unpaid, at 31 January following the tax year in which the liability arises.

This means that even if notification is made after the six-month time limit the penalty can be eliminated if the taxpayer pays the full amount of the tax due on or before 31 January. Where any penalties do arise they are assessed by HMRC in an amount not exceeding the tax unpaid.