Deadline day has passed, so tax penalties galore!

Deadline day has passed

After having 10 months from the end of the last tax year to file their tax return, over 600,000 taxpayers still managed to miss the 31st January deadline and now face a fixed penalty unless they provide a reasonable excuse as to why they sent in their tax returns late.

On 1st February, the morning after the self-assessment (SA) tax return deadline, HMRC announced that nearly 12m taxpayers had filed their tax return on time (a new record!). Whilst these results suggest that taxpayers have finally circled the 31st January deadline on their calendars after 25 years of SA, thousands still waited until the final hours and minutes to file.

HMRC were so excited at the new record that Myrtle Lloyd, their director general for customer services, issued a statement on 1st February thanking the 12m taxpayers that had filed on time and even went so far as offer some helpful advice to those who hadn’t, saying, “…customers who have yet to file, and who are concerned that they will not be able to pay in full, may be able to spread the cost of what they owe with a payment plan.”

Tax Penalties Galore: What do the statistics show?

The number of taxpayers that missed the deadline is considerably lower than last year when 2.3m failed to file their return before the midnight deadline. However, it is not fair to compare this year’s figures to last year as HMRC suspended late filing penalties until 28th February for the second year running to allow taxpayers and accountants more breathing space as the surge in Omicron cases was putting pressure on accountancy practices and businesses alike.

HMRC said that this year, a total of 12,060,872 SS tax returns were due, with 94% of that number coming in before the deadline, with around 11m of those returns being filed online. A pat on the back for HMRC you might think? However, when you drill down a little deeper, their long-standing problems with software systems, wait times and delays, have deteriorated further.

Tax Penalties Galore: Déjà vu yet again!

At the start of December taxpayers and accountants alike, simply could not access any of HMRC’s services, both phone and internet, for almost 5 days. HMRC gave the rather limp excuse that their systems were suffering from, “abnormally high traffic on our IT firewalls”.

Apparently, the volume of phone calls and tax return submissions exceeded their processing capacity, so they took the simple expedient of shutting down the service from 1st December until 5th December. There were further serious delays for several days at the start of January, with both accountants and taxpayers waiting over an hour on the phone line, only to be cut off without actually speaking to anyone.

HMRC’s chief executive Jim Harra had to defend the tax authority’s customer service levels in a letter to the Treasury Committee where he also revealed that the average wait time in January 2023 was 27 minutes longer than that experienced in 2022. As wait times spiralled, Harra than helpfully suggested that taxpayers use online services to free up the helpline advisers, apparently unaware that their IT system had not been able to cope with a lower capacity in early December – so has Déjà vu struck yet again?

HMRC redeployed 850 employees from across the organisation to focus on SA tax returns as the deadline approached, but this affected other services such as the accountants dedicated line which was restricted to ‘complex queries only’.

Tax Accountant’s view

I am truly sad to say that this Blog has become an annual event in recent years. If they can’t or won’t deploy sufficient resources to improve their IT systems and employ more competent phone advisers, this will continue to be an annual event.

Alternatively, they could implement my suggestions from last week’s Blog, in particular that they revise their systems, to avoid taxpayers with little or no tax to pay from submitting a return at all! For more detail go to last week’s blog Low income filing penalties