Missed the Tax Return Deadline? Don’t Panic

Date: 25/02/2014

There are 10 million self-assessment taxpayers in the UK and most of them have submitted their returns on time i.e. on 31 January 2014. There are still over one million returns left to be filed. If yours is one of them, don’t panic. Although you might have already received a £100 penalty from HMRC, but no further penalties will be charged for late filing until 30 April 2014 when the return is three months overdue.

This should give you sufficient time to get your affairs in order. It is worth noting that HMRC will charge daily penalties of £10 for a further three months, up to a maximum of £900. If your return is still outstanding after six months you will face an additional charge of 5% of the outstanding tax or £300, whichever is higher. This is repeated up until the return is twelve months overdue, with possible extra penalties of up to 100% of the tax due if HMRC believes there has been a deliberate attempt to conceal information. It is explained in the table below:

Length of Delay Penalty you will have to Pay
1 day late A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late £10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late £300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late £300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead. In some cases the penalties can be even higher than this.
These are as well as the penalties above.

 

HMRC will charge penalties on late payment of tax as well. Failing to pay tax within 30 days of the due date could see you charged a penalty of 5% of the outstanding amount. Further 5% penalties are then charged when the payment is six and 12 months overdue. It is explained in the table below:

Length of Delay Penalty you will have to Pay
30 days late 5% of the tax you owe at that date.
6 months late 5% of the tax you owe at that date. This is as well as the 5% above.
12 months late 5% of the tax unpaid at that date. This as well as the two 5% penalties above

HMRC will also charge daily interest at a rate of 3% per annum on any outstanding amounts. Incentive is strong to file as soon as possible. If you file in the next two weeks, you can limit any fines to £100, but putting it off will see the penalties and interest increase quickly from as soon as the start of March. It is also important to remember that even if you have no tax to pay, failing to send in your return could result in a penalty of up to £1,600. The sooner the return is filed and your tax paid, the less any penalty will be. And if you’ve already filed your return, now is the perfect time to start getting your records ready for next year’s return!

Appealing against a late filing penalty

Late filing penalties can be cancelled if you have a ‘reasonable excuse’ for filing late. Please note that you should file your tax return before making your appeal against the late filing penalties. Initially you make your appeal to HMRC. The appeal should normally be made within 30 days of the penalty notice being issued, but HMRC may consider late appeals. If HMRC does not allow your late appeal, you can apply to the Tax Tribunal to have your appeal allowed. Appeals need to be made in writing and this may be done using form SA 370. Form 371, accessible from the same page, should be used for partnership late filing penalty appeals. HMRC expects you to file the tax return as soon as you are able to do so – within 14 days of the end of the special circumstances which caused you to file late. If HMRC rejects your appeal you can ask HMRC to review the decision. The review will be carried out by a different HMRC official. You should consider asking for a review if you missed out significant information on your initial appeal letter. Failing this you may appeal to the First Tier Tribunal (Tax).

Reasonable excuse

If HMRC, or the Tribunal, accept that you have a “reasonable excuse”, the entire penalty is cancelled. Points to consider are: The ‘reasonable excuse’ must continue throughout the period from the missed filing date until shortly before you actually file the return. This means that it may be accepted that you may have a ‘reasonable excuse’ for some, but not all, of the penalties charged. HMRC takes a narrow view of what is a ‘reasonable excuse’. HMRC’s view can be found at http://www.hmrc.gov.uk/sa/appeals-decisions.htm#e The tribunal may, in some cases, take a wider view of what is reasonable. For example, the tribunal may accept that you had a reasonable excuse if you relied on your accountant, and it was reasonable to expect that your accountant would file on time, and you did all you could to ensure this. But this will not apply if your accountant has previously been unreliable – for example if returns for previous years were filed late by your accountant. If you registered for on-line filing by 31 January 2014, but did not get your access code in time to file before the deadline, and filed your 2012-13 return using HMRC’s free software by 15 February 2014, this should count as a reasonable excuse.

Appeals to the First Tier Tribunal

If HMRC turns down your appeal, even after a review, you can ask for the appeal to be heard by the Finance and Tax Tribunals, First Tier Tribunal (Tax). This can be done at an oral hearing or on paper – but the taxpayer always has the right to appear and be heard. You can find out more about the First Tier Tribunal (Tax), and download an appeal form from their website at http://www.justice.gov.uk/tribunals/tax/appeals