The Chancellor has brought forward the deadline for filing 2007/08 income tax returns in paper form to 31 October 2008. The deadline for online filing will remain 31 January 2009. Last year's Budget introduced a consultation advancing filing deadlines that led to protests from the tax profession, but these have mainly been ignored.
The tax authorities can open an enquiry into a tax return within a year of the filing deadline. For 2007/08 returns, the "window" will be one year from the date the return is received by HMRC, finally offering an incentive for filing tax returns early.
Revenue enquiries and penalties
Since the Inland Revenue merged with Customs & Excise, the powers of the combined department have been under review. The intention is to make the powers to enforce all taxes - and the penalties for non-compliance - consistent. The Budget includes proposals to move towards this objective.
Closing down loopholes has become a regular feature of Mr Brown's Budgets and several of the press releases supporting the speech contained detailed rules to stop the cunning plans of lawyers. These are probably only of interest to people who want artificial tax plans - they will need to know that some things no longer work!
The Chancellor was very keen to parade his "green" credentials. These included significant increase in Vehicle Excise Duty for the highest gas-guzzling cars, announcing fuel duty increases for the next three years and increasing the rates of landfill tax. One major revenue-raiser which was presented under this category is the revision to empty property relief for business rates from April 2008. The relief will now be restricted to the first three months for office and retail premises and six months for factories and warehouses. This is intended to encourage rapid reuse of such properties rather than development of Greenfield sites.
The Chancellor announced in his speech that he was concerned that not all the available Gift Aid relief was claimed by charities and donors. However, the one change announced related to an unusual situation: where a donor receives a benefit in return for making a gift to charity, income tax relief is not generally available. This rule is relaxed where the value of the benefit is much less than the value of the gift, i.e. the transaction is essentially a donation but the donor receives something in recognition of making it. The limit on the benefit for gifts of £1,000 or more has been 2.5% of the gift, subject to a maximum of £250. With effect from 6 April 2007, these limits are increased to 5% and £500. This means that the benefit on a gift of £6,000 could not exceed £300.
This rule is particularly relevant at charity auctions where people tend to pay a very large amount for trivial purchases - the intention is to make a gift, and the relief for such a gift is more likely to be available as a result of this change.