For many taxpayers completion and submission of the annual Self Assessment return is a necessary evil which just has to be done, and most strive to complete the return on time.
HMRC has revealed that 10.39 million Self Assessment returns were completed ahead of the 31 January deadline this year which is an improvement over last year, but still leaving an estimated 870,000 returns outstanding – a potential windfall of £87m or more in penalties for the taxman.
So what if you have missed the deadline?
If you have, then an initial £100 fixed penalty will apply even if there was no tax to pay or if you have paid your tax on time. But you still need to submit your return, and the advice is to do so as soon as possible before further penalties apply. Delaying three months will incur a daily penalty of £10 per day up to a maximum £900, and after six and then 12 months a further five per cent of the tax due or £300 whichever is the greater. On top of that if the tax has also been paid late, interest applies along with 5 per cent surcharges based on the tax outstanding at 30 days, six months and 12 months. So delaying can be a very expensive option.
What if you believe you have a ‘reasonable excuse’ for being late with your return? Taxpayers hoping to claim this may find it more difficult than they anticipated. Unfortunately there is no definition of what constitutes a reasonable excuse, and HMRC’s opinion often differs from the taxpayer’s perception. HMRC will generally accept a bereavement of a close relative, a serious illness of the taxpayer or close relative or unforeseen events as a reasonable excuse. However complexity of the return, pressure of work and lack of planning will not be accepted.
In January HMRC announced that following severe weather in many parts of the country, taxpayers affected by flooding at their premises, or their agents’ premises, will not be asked to pay a penalty if their return is submitted without unreasonable delay. These people need to make sure HMRC is aware of the reason for any continued delay and submit their returns as soon as possible. It is also hoped that those affected by the storms may also receive a favourable response to any reasonable excuse appeal where they have been affected, for example, by prolonged power and internet outages. In the absence of any specific announcement from HMRC, these appeals will be decided by individual inspectors who may or may not be sympathetic.
If you would like to discuss any of the points raised here further, please contact Jackie Hall or your usual RSM contact.