If you haven’t yet submitted your Self Assessment Tax Return to HMRC, it can still be done, but do not delay a moment longer in view of the harsher HMRC penalty regime, with penalties escalating the longer you postpone submitting your tax return.
Late Filing Penalties
The penalty regime changed quite dramatically on 6th April 2011 and penalties are not tax deductible. Also, the new penalty regime is much more costly than the old system. Before the 20011/12 tax year, a tax return that was twelve months overdue, would only have cost you £200 in penalties; and if there was no tax to pay, the penalties were waived. However, under the new regime penalties could reach £1,600 plus in a similar twelve month period.
Current late filing penalties are as follows:
|I day||Automatic fixed penalty of £100. This applies even if you have no tax to pay|
|3 months||£10 per day up to a 90 maximum of £900 in addition to the fixed penalty of £100|
|6 months||£300 or 5% of the tax due; whichever is higher, in addition to the penalties above|
|12 months||A further £300 or 5% of the tax due; in addition to the penalties above|
Additionally, if HMRC decide that your case is serious enough, they have the power to fine you up to 100% of the tax due
There are however two potential get out of jail cards you may be able to play.
Firstly, if a return has been sent to you late, 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. Thus if the return was issued after 31st October, say on 1st December, the due date would be 1st March. This is relatively unusual, and usually only happens in the first year of going into business.
Secondly, and by far the more likely reason is because you have a very good excuse. In HMRC parlance, it’s called “A Reasonable Excuse”. Examples of a Reasonable Excuse include, never having received the return from HMRC, loss of your tax records due to fire, flood or theft, submission problems either with the postal system or HMRC’s online service, serious illness, bereavement etcetera. In this regard HMRC have provided a guide as to what would be a Reasonable Excuse or not – http://www.hmrc.gov.uk/sa/appeals-decisions.htm#e
But please note, if you are appealing under the Reasonable Excuse rules, you will need evidence to support your claim with some evidence, such as printouts of error messages, proof of postage, a letter from your doctor etcetera.
Late Payment Penalties
Firstly, I should point out that 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. They are therefore quite different from late filing penalties and are in addition to them.
Current late filing penalties are as follows:
|One month||5% of the tax outstanding at that date|
|Six months||An additional 5% of the tax outstanding at that date|
|Twelve months||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.
However be warned that HMRC will have very little sympathy if you appeal on trivial grounds, such as you incorrectly completed your cheque or cite pressure of work. You will you stand much 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 realized there was a problem with the first payment.
Finally on this subject, if you have made a Time to Pay arrangement with HMRC because you cannot pay your tax bill in one go, late payment penalties will not be imposed, provided that you set up the arrangement before the late payment penalties started. However, interest is still chargeable.
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 payments is 3.0% and if you are owed money back, then its 0.5%.
Most appeals will come under the category of “Reasonable Excuse” as I’ve explained earlier. There is virtually no point in calling HMRC’s helpline as appeals must be done in writing, together with any supporting evidence and they should be made to your local tax office, ideally by recorded delivery. But note, even if you successful in your appeal against late filing or late payment penalties, any interest arising will still be payable.
If you haven’t yet submitted your tax return and are likely to have tax to pay, do so before the 1st March to avoid the more draconian penalties, or contact your Accountant immediately.
Secondly, if you believe that you may possibly have grounds for appeal and feel you need some help, again contact your Accountant immediately.
Morgan Jones & Co have a vast experience in these areas and have the resources to provide immediate help and advice, should you need it.