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Will HMRC make a U-turn on the 31st January deadline?

Waive late filing penalties

In early December, all of the leading accountancy bodies the ACCA, CIOT, AAT, ICAEW and ICAS, put a joint submission to HMRC, asking them to ease the self-assessment deadline due to the Covid-19 workload pressures that all accountants are under.

Responding to the joint letter from the accountancy bodies, HMRC’s chief executive Jim Harra said their proposal to waive late filing penalties for a short period after 31st January would “unduly complicate” HMRC’s self-assessment message and would “send a blanket signal that it is okay to file late”.

Harra explained that this could have some “serious disadvantages” for taxpayers. “De-coupling the payment and filing dates might confuse customers, and even lead to non-payment, interest accruing, and late payments being triggered.” He even suggested that it would also encourage some taxpayers to file late when they don’t need to.

HMRC’s boss went on to say that the Revenue wants as many taxpayers as possible to complete their returns by the self-assessment deadline, “even if they can’t pay in full”, as by “filing their return it will crystalise their SA liability, and we will offer our support, if they need it, to pay their tax”.

No penalties for late filing caused by Coronavirus delays

However, HMRC has acknowledged some taxpayers and their accountants will not be able to file on time due to the coronavirus’s impact. The HMRC chief executive said that these taxpayers should get their returns in as soon as possible, but they will not be penalised if they need more time.

Whilst HMRC will not issue a blanket waiver of late filing penalties; it will accept pandemic-related disruption caused to the taxpayer’s business or their personal circumstances as a reasonable excuse. The same applies when agents are delayed in filing a return due to the pandemic, and this will also be treated as a valid, reasonable excuse.

Extension to late filing appeal

jim-harra HMRCs director of general business tax

Jim Harra

If the tax return is filed late, these taxpayers will automatically receive a penalty notice. Still, Harra said that those affected, or their accountant can get the late filing penalties “cancelled easily” by contacting HMRC.

HMRC will extend the appeal period from one to three months to give taxpayers and accountants more time. Harra signed off the letter by expressing his gratitude for the “valuable and vital work” the accountancy profession has undertaken during the pandemic.

“I understand and sympathise with the extreme pressures your members have been under in this exceptional year: they have helped deliver the economic response to the pandemic despite the suffering effects of the pandemic on their own firms.”

Accountancy bodies approach

How to mitigate the impact the coronavirus is having during the tax-return season has been an ongoing debate within the accountancy profession. The majority of the accountancy bodies have pressurised HMRC to waive late filing penalties until March, or as an alternative, extending the deadline to either March 31st or April 5th, 2021.

Although the accountancy bodies differ slightly in their approach to the problem, they agree that the pandemic has put all accountancy firms under enormous pressure. As ICAS chief executive Bruce Cartwright outlined in his letter to HMRC: “Accountancy firms are operating under great stress and are the unsung heroes of implementing the CJRS and SEISS and for enabling the Chancellor’s schemes to keep many employees and businesses going in these extraordinary times.”

Tax accountant’s view

David Jones Shrewsbury Accountant and Founder of Morgan Jones

David Jones Tax Accountant

It could well be that HMRC may be reluctant to change course and offer a concession, as up to 31st November, the filing rates were holding up reasonably well. However, HMRC knows very well that around 50% of tax returns are filed during December and January, so the problem has yet to manifest itself.

In his response to the accountancy bodies, Jim Harra has already strongly signalled the probability of concessions if they’re asked for, but on a case-by-case basis, rather than a blanket approach. I suspect that he’s reluctant to announce blanket concessions at the moment, as he’s worried that many taxpayers will sit back and take advantage of the new deadline.

My view is that HMRC will closely monitor the numbers of tax returns being filed, and if, as everyone suspects, filing numbers start to drop significantly they will make an announcement at the very last minute.

Personally, with most of the country effectively in lockdown and Covid-19 infections seemingly spiralling out of control, I think Mr Harra should make it clear to taxpayers right now that concessions will be made.

As ever, if you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.