What Is A Tax Determination?

Tax Debt : What is a Determination?

Under the system known as Self Assessment, millions of people in the UK are required to fill in a tax return every year, giving details of income and costs in order to come to a calculation of the amount of tax owed. However, either through ignorance, oversight, or fraud thousands of returns are left unfiled each year.

This may be because no income was made (although if a return is demanded, then it should be filled in regardless), or because the person responsible wasn’t aware the a return needed to be filed.

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Estimated Tax Debt

When these cases come to light, HM Revenue & Customs will generally send out a tax demand with an estimate of the amount they think you have to pay, based on previous returns filed or any other information HMRC can access about your financial affairs.

This estimate of tax due is known as a Determination, and can often be much higher than the true amount of tax you’d owe had you filled in your return.

Nonetheless, once a Determination has been made, the tax collectors have full legal rights to pursue recovery of this amount, whether or not you agree with how they’ve come to this figure.

Tax Returns

If you receive a tax demand with a high determination, firstly don’t panic. Determinations aren’t set in stone, and the true amount of tax you owe can be recalculated so long as you file all the missing tax returns and bring your account up to date. Even if you pay the Determination amount off in full, you’ll still be liable to receive fines and interest charges if you fail to submit the outstanding returns.

Even if you do submit your tax returns, recovery action on the determined debt amount may well continue while the final figures are worked out, so you’ll have to get in touch with the tax people to come to an interim payment arrangement until the amount you actually owe is finalised.