Tax RETURNS, ASSESSMENT, INTERESTS AND PENALTIES Q&A

Solution for question number 5 from  this tutorial page click here to see question 5.

Start by:-

Year of income:  2011

timeline

01/09/2011        

                         1^st-instlmnt                       2^nd-instlmnt              3^rd-instlmnt                         

↑                         30^th/11/2010                        18^th/02/2011                   31^st/05/2011                          31^st/08/2011                      30^th2012

         

                                                                                                          Submission of       paid tax in                                                                                                                                                                                Tax Statement       full(15/06/2011)                        

Note: the final due date is 6 months after the statement.

CALCULATING The penalties for failure to file statement of estimates and returns (under section s.78(1) of ITA 2004).

Estimated tax ,(A) = 4,040,000

Declared = 4,800,000

Assessed by =

                                                  FORMULA for installments

                                                    A – C                                  where:  C = previous payment,                 A = estimated tax

                                                         B                                                       B = instalments left

For the first instalment

There was no previous payment, C = 0  and A = 4,040,000            

So from the formula:            4,040,000 – 0            =     1,010,000 tsh

                                                         4                 

2^nd instalment

 Previous payment was C = 1,010,000   , A = 4,040,000            

From the formula:                  4,040,000 – 1,010,000             =   1,010,000   tsh

                                                           3                 

3^rd instalment

Previous tax payments C, was 2,020,000 , A = 4,040,000            

                                           :   4,040,000 – 2,020,000             =   1,010,000   tsh

                                                                2                 

4^th installment

Previous tax payments C, was 3,030,000 , A = 4,040,000            

                                           :   4,040,000 – 3,030,000             =   1,010,000   tsh

                                                               1                 

  Due dates for the above instalments:

                         1^st       -        30/11/2010

                         2^nd      -         28/02/2011

                         3^rd      -         31/05/2011

                         4^th      -          30/08/2011

Nb: in real sense the due date is supposed to be only on the first instalment and it’s the compulsory to submitting tax statement

i.                     Failure to file tax returns

a). penalty for failure to submit tax statement (refer to the red text above).

                               -        30/11/2010    (due date)

                              -         15/04/2011    (submitted)

                              -         01/12/2010   (start of failure) 1^st day after due date above

                              -          15/04/2011 (end of failure)

DURATION OF FAILURE =5 months i.e. from: 01/12/2010  to  15/04/2011

Calculating penalty:

                             Penalty = 2.5% ( A – C )         compare with         penalty = 15Cp      

(CP – currency points 15,000)

                                          = 2.5% ( 4,040,000 – 0 )                     VS                      = 15 x 15,000 t

Take the greater:

                                             =    1,010,000                                   vs                           = 225,000

So penalty was 225,000 per month.

                                                       5 x 225,000 = penalty was = 1,125,000

ii.                   Failure to submit returns of income.

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