Tom Walker explains how penalties are applied if you fail to file your tax return on time.
If you are required to submit a tax return in order to pay income tax, it's important to plan for this and give yourself enough time to complete the documentation before the closing date.
If you don’t meet the self assessment tax return deadline then penalties will be charged. Bear in mind that daily interest is then accumulated on top of this. There are two kinds of penalties, those for late filing of self-assessment tax returns and those for late payment of tax due (payments on account) as a result of self assessment.
By missing deadlines you are putting yourself on HMRC‘s radar and you're more likely to undergo a tax enquiry. Be sure to get your returns in on time and pay before the due date, to reduce the risk and stress of dealing with a potential tax investigation.
Who has to complete a self assessment tax return?
You will need to complete a self-assessment tax return if any of the following apply to you:
You were self-employed during the tax year
Your savings or investment income was either £10,000 or more before tax
You made profits from selling things like a second home, shares or other chargeable assets and thus need to submit Capital Gains Tax calculations
You received £2,500 or more in untaxed income, e.g. from renting out a property or savings and investments
You were a company director - unless it was for a not-for-profit organisation (e.g. a charity) and you didn’t receive any pay or benefits, such as a company car
Your income (or your partner’s) was in excess of £50,000 and one of you claimed Child Benefit
You received dividends from shares and you’re a higher or additional rate taxpayer
You were a trustee of a registered pension scheme or trust
You lived abroad while receiving a UK income
You had income from abroad that hasn't been subject to tax
HMRC need to close the tax gap to assist the government in reducing the budget deficit. Consequetly there are stringent penalties for those who don't file on time and these are as follows:
For penalties that apply to late payment, check out this post, what you need to know about payments on account. It has been reported that HMRC are planning to disregard the £100 fine for late filing of the self assessment form as they admitted it may be unfair to fine someone who missed the deadline by 24 hours the same amount as someone who has missed it by 3 months.
In order to obtain this relief there must be a “reasonable excuse” for filing the return late and the definition of this is very restrictive. Plans published for public consultation are considering replacing the automatic fine with a penalty points system designed to catch those who repeatedly miss the deadline rather than those that have made a genuine oversight.
However, HMRC have agreed recently that they will not challenge any late filing penalty appeal provided that there is a reasonable excuse for doing so and that an appeal has been made.
Can penalties be reduced or payment plans put in place?
There is such a thing as a ‘time to pay agreement’ whereupon if an agreement is established the penalty payment can be suspended. However if the agreement is broken the tax payer will be liable.
Under statutory requirement, HMRC are obliged to consider whether there are any special circumstances (defined as uncommon, exceptional or unusual circumstances) that require the penalty to be reduced. If HMRC fail to make such considerations, their decision to impose a penalty is flawed.
Where there is evidence of this, the taxpayer can go to tribunal to make an appeal. The tribunal will then make the decision as to whether special circumstances exist and the penalty can be reduced. As a taxpayer, you have 30 days to make such an appeal, although late appeals can be accepted at the discretion of HMRC or a tribunal judge.
Reasonable excuses could include the following:
Your partner died shortly before the tax return or payment deadline
You had an unexpected stay in hospital that prevented you from dealing with your tax affairs
Your computer or software failed just before, or while, you were preparing your online return
Service issues with HMRC online services
A fire prevented you from completing your tax return
Postal delays that you couldn’t have predicted
The following are unlikely to be accepted:
You relied on someone else to send your return and they didn’t
Your cheque bounced or payment failed because you didn’t have enough money
You found HMRC’s online system too difficult to use
You didn’t get a reminder from HMRC
If you choose to appeal you need to complete form SA370 or write to HMRC giving your reasons for the appeal.
Dates for your diary
Make sure you aren’t liable to late filing or payment fines by adding these dates to your calendar (current tax year is 6 April 2018 to 5 April 2019):
If you missed the paper deadline you can still complete your return online using your unique tax payer reference (UTR). If you choose this option then be sure to not return the paper version as you will still be fined!
If you're a first time online self-assessment user, you need to consider that when you register it takes 7-10 days to receive your activation code by post; unofficially therefore you should note that your deadline is 21 January!
Do familiarise yourself with our post, how to spot (HMRC) phishing emails lurking in your inbox, as following self assessment time there is always a spate of fraudulent communications. Their spurious tone is to advise you of some form of tax rebate. HMRC will never contact you about this and emails of this calibre need to be reported.
If you need advice as to whether you need to submit a self assessment tax return, or require help completing one, be sure to seek the help of your advisor.
The content of this post is up to date and relevant as at 08/04/2019.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.