If you’ve missed the deadline for filing your online tax return, then you take some degree of comfort from the fact that you were definitely not alone.
Figures for the 2014/15 self-assessment filing have not yet been released, but to give some context, last year an estimated 870,000 tax payers received an automatic late filing penalty. Missing the filing deadlines on either 31st October (paper returns) or 31st January (online submissions), will lead to a fixed, automatic late filing penalty of £100: persistent delays thereafter can result in escalating penalties courtesy of the penalty regime which was introduced in 2011.
As accountants, our advice would be to file your self-assessment tax return as soon as is practically possible in order to minimise the severity of fines. The consequences in terms of penalties, fines and interest can otherwise be very costly indeed.
What penalties are you likely to face if you’ve missed the deadline?
The penalty regime changed quite dramatically on 6th April 2011. Unfortunately the new penalty regime is considerably more costly than the old system was. Previously a tax return that was twelve months overdue would have only cost £200 in penalties: under the new regime penalties could reach £1,600 or more.
|Length of Delay||Penalty|
|1 day late||Automatic fixed penalty of £100. The penalty applies even if you have no tax to pay or have paid the tax you owe on time.|
|3 months late||£10 per day up to a maximum of £900. This is an additional penalty on top of the initial £100 fixed penalty|
|6 months late||£300 or 5% of the tax due – whichever is higher. This is also an additional penalty on top of the initial £100 fixed penalty.|
|12 months late||£300 or 5% of the tax due – whichever is higher. This is also an additional penalty on top of the initial £100 fixed penalty. In more serious cases you may even be asked to pay up to 100 % of the tax due instead.|
However, there is some good news: in certain circumstances you may be able to get the late filing penalty cancelled. 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. So, if a 2013/14 return was issued on 15th November 2014, then the due date would be 15th February 2015; rather than 31st January 2015. Although this occurrence is rare, it can happen occasionally particularly in the first year of registration. The other way in which a penalty can be revoked is if you can provide HMRC with a ‘reasonable excuse’ for late payment.
What’s a reasonable excuse?
Well, HMRC have given specific examples such as never having received the return from HMRC, loss of your tax records due to fire/ floor/ theft, submission problems either with the postal system or HMRC’s online service, serious illness or bereavement.
If you think you might have grounds to make a ‘reasonable excuse’ you should note that HMRC has very strict protocols and guidelines about what does and doesn’t qualify: excuses like work commitments, the complexity of your affairs, lack of information, or absence of HMRC reminders will not be accepted as reasonable excuses for late filing. Even long periods in hospital or convalescing will not necessarily be acceptable excuses for HMRC. So if you feel you do have sufficient cause to justify your late filing, you will need to provide robust evidence to support your claim: evidence like prints of error messages, proof of postage etc.
Late Payment Penalties.
What’s the difference between late payment penalties and interest? Well, it’s simply this. 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.
Current late payment penalties are as follows:
|Length of Delay||Rate of Penalty|
|30 days||5% of the tax outstanding at that date.|
|6 months||An additional 5% of the tax outstanding at that date.|
|12 months||A further 5% of the tax outstanding at that date.|
As with late, 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.
It is also worth noting is that if you’ve made a Time to Pay arrangement with HMRC because you cannot pay your tax bill in one go, late payment penalties are unlikely to be imposed . That is as long as 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.
If you fail to pay the full amount outstanding by the due date, HMRC will charge interest on the amount outstanding until payment is received. 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 possibly be reduced, is if you paid promptly, in full or your tax bill is reduced.
If you’d like any further information on self-assessment and late payment penalties, or are considering lodging an appeal, then please feel free to contact Steven Glicher accountants on 0161 485 8007 or email info@.