Missed the Tax Return Deadline?
If you are yet to file your Self Assessment tax return help is still available! But don’t delay as the new HM Revenue & Customs (HMRC) penalty regime will mean that the penalties increase the longer you postpone filing your return.
Self Assessment tax returns must be filed by the 31st October following the tax year if filing a paper tax return or 31st January if filing online. An estimated 1 million taxpayers are expected to receive an automatic late filing penalty of £100 so if you have missed the deadline you are by no means alone.
Filing a paper return after 31st October or online submission after 31st January, will lead to a fixed, automatic late filing penalty of £100. And delays in filing returns of over three months can result in escalating penalties courtesy of a new penalty regime introduced last year.
The Union representing a number of HMRC staff called for strike action by their members on what is probably the most important date in the taxpayer’s calendar- 31st January 2012. As a result, for this year only any 2010/11 self assessment tax returns or payments received on 1st or 2nd February will be treated as having been received on 31st January instead. This means no late filing penalties or interest will arise provided you file and pay by 2nd February.
In this article, we take a look at the consequences of delays in dealing with your self assessment tax affairs and how these can be mitigated, broken down into three sections:
- Late filing penalties
- Late payment penalties
- Interest on late payments
Late filing penalties
The penalty regime changed quite dramatically on 6th April 2011 and in some cases, the late filing and late payment penalties you are charged may be under the ‘old rules’. In either case though, you should avoid incurring penalties as they are a waste of hard-earned cash and are not tax deductible. The new penalty regime is much more costly than the old system too. Whereas a tax return that was twelve months overdue may have cost only £200 in penalties; under the new regime penalties could reach £1,600 or more! Read a previous article we produced on late filing penalties here for more detail.
But there are some instances when you can get a late filing penalty cancelled and there are two main reasons why a penalty could be revoked.
Firstly, if a return has been sent to you late (after 31st July following the tax year end), then the filing deadline for the tax return is either the normal due date or three months from the date of issue of the return, whichever is later. For example, if the return was issued on 15th November 2011, then the due date would be 15th February 2012; rather than 31st January 2012. This is rare, but it can happen - particularly in the first year of registration.
But the more likely reason is because you have a very good excuse - known as a ‘Reasonable Excuse’. HMRC give specific examples of a Reasonable Excuse such as never having received the return from HMRC, loss of your tax records due to fire/ floor/ theft etc, submission problems either with the postal system or HMRC’s online service, serious illness, bereavement etc.
If you think you might have grounds to make a Reasonable Excuse, be aware, that there are strict guidelines on what does not qualify and these include work commitments, complexity of your affairs, lack of information, absence of HMRC reminders etc. HMRC even notes that long periods in hospital or convalescing will not necessarily be a Reasonable Excuse. And you will need evidence to support your claim too, such as prints of error messages, proof of postage etc.
Late Payment Penalties
Firstly, it’s worth clarifying the difference between late payment penalties and interest. Late payment penalties or surcharges are imposed to penalise the taxpayer for paying late. Interest is charged to reflect the fact that HMRC effectively gave interest-free credit whilst the tax was outstanding. So they are quite different and not in place of one another.
Current late payment penalties are as follows:
| Length of delay | Rate of penalty |
| Thirty days | 5% of the tax outstanding at that date |
| Six months late | An additional 5% of the tax outstanding at that date |
| Twelve months late | A further 5% of the tax outstanding at that date |
As with late tax returns, it is possible to ask HMRC to cancel or reduce late payment penalties. The examples of a Reasonable Excuse for late payments are similar to those above for tax returns, such as serious illness and bereavement. However, you may also have grounds for appeal if the payment was lost in the post or stopped in error by the bank.
But again HMRC have little sympathy for taxpayers and reasons such as cheques being completed incorrectly, failures by agents, work commitments etc will generally not be accepted as a Reasonable Excuse. And again, you stand more of a chance of winning your appeal if you have evidence that you tried to pay on time- and that you made attempts to pay again when you realised there was a problem with the first payment.
One thing worth noting is that if you have made a Time to Pay arrangement with HMRC because you cannot pay your tax bill in one go, late payment penalties should not be imposed- provided that you set up the arrangement before the late payment penalties started. However, interest is still chargeable. If you set up the arrangement before the subsequent late payment penalties kick-in, you should avoid these later penalties being imposed.
Interest
If you fail to pay the full amount outstanding by the due date, HMRC will charge you interest on the amount outstanding until HMRC receive your payment. HMRC also pays you interest if you overpay. The current interest rate for late payment is 3.0% and for repayment is 0.5%.
Even if you successfully appeal against late filing or payment penalties, any interest arising will still be payable. The only way this could be reduced, is if you paid promptly, in full or your tax bill is reduced.
Conclusion
If you have been charged penalties and there are exceptional circumstances that lead you to file or pay late, you may have grounds for appeal. If you would like some assistance in handling the appeal, please feel free to get in touch with your local TaxAssist Accountant who would be happy to help.
Posted by Jo Nockels
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