Changes to Self-assessment Tax Return Filing Dates
Legislation will be included in the Finance Bill introducing different filing dates for paper and online self-assessment tax returns filed by individuals, trustees and partnerships. The two separate filing dates will be:

• for paper returns, 31 October (for the tax year 2007/08 that will be 31 October 2008). HMRC will allow extra time for the minority for whom online filing facilities are not yet available; and
• for returns filed online, 31 January (for the year 2007/08 that will be 31 January 2009). The following consequential changes will be made:
• for taxpayers who want HMRC to calculate their tax liability for them, the cut off date will move from 30 September to 31 October, aligned with the new paper return filing deadline;
• the period during which a return can be amended will be linked to the 31 January anniversary date;
• changes will be made to retain the minimum three-month period for completion and amendment where the return is issued late; and
• provisions elsewhere in the legislation that have time limits linked to the current filing dates will be amended. This will apply to tax returns that are issued on or after 6 April 2008 and relate to the tax year 2007/08 and subsequent years.

Changes to the Tax Enquiry Windows and Online Filing and Payment Arrangements
Enquiry Window
The enquiry window, the period during which HMRC can enquire into self-assessment returns, will be linked to the date the return is received by HMRC. This change will apply to:

• income tax self-assessment tax returns for 2007/08 and subsequent years; and
• company tax returns for accounting periods ending after 31 March 2008 (with the exception of large groups of companies whose window will continue to be linked to the statutory filing deadline).

Online Filing
Regulations will be published, for consultation, to provide a single regime requiring online filing and electronic payment that will apply to all taxes and duties for which HMRC are responsible.

Payment by Cheque
Currently, HMRC deem payment to have been made as soon as they receive the cheque. Regulations will be introduced to provide that where a business pays VAT or corporation tax by cheque, HMRC will deem payment to have been made only once funds have cleared into their account. This rule will apply from the date that requirements to pay electronically start to be phased in.

Penalties for Incorrect Returns
The Finance Bill will introduce a single new penalty regime for incorrect returns for income tax, corporation tax, PAYE, NIC and VAT. The penalty will be determined by:

• the amount of tax understated;
• the nature of the behaviour giving rise to the understatement; and
• the extent of disclosure by the taxpayer.

Each penalty can be substantially reduced where the taxpayer makes a disclosure, more so where this is unprompted, and there will be the right of appeal against penalty decisions.

A new concept of suspended penalties will also be introduced.

The new provisions will apply from a day to be appointed and this is expected to be for return periods commencing after 31 March 2008 where the return is filed after 31 March 2009. There will be at least 20 months between Royal Assent to the Finance Bill and the implementation of the changes.

Criminal Investigation Powers and Safeguards
Legislation will be introduced in the Finance Bill to provide that the appropriate powers and safeguards under the Police and Criminal Evidence Act 1984 will apply on a consistent basis to all HMRC’s criminal investigations in England, Wales and Northern Ireland. These include:

• applying to magistrates and judges for search warrants;
• applying to judges for court orders to obtain third-party evidence; and
• arresting suspects, search upon arrest and questioning. New powers will be introduced for Scotland, including:
• applying to sheriffs for search warrants and for court orders to obtain third-party evidence;
• arresting suspects, search upon arrest and questioning; and
• provisions to help identify suspects and potential witnesses. The changes will come into force on a date to be set by Treasury Order, likely to be before the end of 2007.