Weekly tax brief

Don’t ignore the true impact of the automatic filing deadline extension for accounts

17 November 2020
Regulations introduced in June 2020 to help businesses during the Coronavirus pandemic granted a temporary extension to the accounts filing deadlines, giving companies, LLPs and Scottish limited partnerships an extra three months to submit accounts to Companies House. For eligible businesses, the deadline will be updated automatically and there is no need to apply for the extension. However, it applies only to filings at Companies House, and no extension has yet been announced for either corporate or personal tax returns. The impact of this as we head towards the tax filing deadlines cannot be ignored.

With the normal corporation tax (CT) filing deadline now aligned, in many cases, with the temporary accounts filing deadline it will be difficult, if not impossible, for affected businesses to meet the CT filing deadline when accounts are finalised so late in the tax reporting cycle. It therefore seems a nonsense not to extend the CT deadline to reflect the extension for accounts. Inevitably, many will find themselves in a late filing position, with associated penalties, unless HMRC takes positive action to address this.

The later filing of accounts and CT returns also has a knock-on effect on the timing of submission of Self-Assessment (SA) tax returns for individuals, particularly for directors, and members of LLPs, who may be waiting longer than usual for either details of bonuses or confirmation of profit shares in the delayed accounts. As we head towards the normal 31 January 2021 filing deadline, the backlog of returns awaiting finalised accounts information before they can be completed grows daily, placing an unwelcome burden on taxpayers and their advisers throughout the country.

Part of HMRC’s seeming reluctance to extend the tax filing deadlines may lie in the fact that so many tax deadlines are intertwined. Changing one may lead to having to change others, so that the whole tax system potentially slows to a snail’s pace as a result.

However, if there is no appetite on HMRC’s part to legislate to defer the deadlines, it should at least automatically waive any late-filing penalties for a period of time. It has already confirmed that that it will consider Coronavirus a reasonable excuse for missing filing deadlines but this involves time and cost.

One thing for sure is that, unless HMRC takes positive action to address the situation in the short term, many taxpayers and their advisers will be spending unnecessary time and effort, and incurring unnecessary costs, on appealing many thousands of late filing penalties as a result.