Maureen is a sole trader and is registered for corporation tax. She has been specified by the Zimbabwean Revenue Authority (ZIMRA) to be taxed under the self-assessment system.

On 10 August 2016, Maureen received an estimated assessment dated 31 July 2016 in respect of the year ended 31 December 2015. The estimated assessment shows corporation tax payable of US $18 000.

Maureen's accounting records show that her actual corporation tax payable for the year ended 31 December 2015 is US$ 26 000, after taking into account provisional tax paid of US$12 000. Maureen believes that because the estimated assessment of the tax payable is favourable, is not obliged to submit an income tax return for the year ended 31 December 2015.

Required

1. Outline the circumstance in which an estimated assessment can be issued by the Zimbabwe Revenue Authority (ZIMRA).

• When a taxpayer has failed to submit a return on time;
• When a taxpayer is unable to submit an accurate return due to circumstances beyond the taxpayer's control;
• When a taxpayer has not kept proper accounting records.

1. Briefly comment on Maureen's view regarding the estimated assessment she has received for the year ended 31 December 2015.

• View is incorrect as she is obliged to submit her annual income tax return on the stipulated date;
• The estimated assessment does not absolve Maureen from her statutory;

1. Outline the tax consequences of Maureen's failure to submit an income tax return for the year ended 31 December 2015 include appropriate calculations to support your answer and also state the income tax return submission date and the due date for the payment of tax under the self-assessment system. [25]

• Return for the year ended 31 December 2015 should have been submitted on 30 April 2016
• Penalty for non-submission of the income tax return is calculated at US$30 for every day the return remain outstanding up to a maximum penalty of US$ 5 430 ($30 x 181 days)
• For failing to remit the tax payable of $26 000 on 30 April 2016, a 100% penalty is chargeable which amounts to US$26 000;
• An interest of 10% per year is chargeable on the outstanding tax for the period the amount remains unpaid;

The estimated assessment is a direct consequence of failure to submit the return on the stipulated date.

 

Answer rating: 100% (QA)

Circumstances for Issuing an Estimated Assessment When a taxpayer has failed to submit a return on time In situations where a taxpayer has not submitt... View the full answer