This week, HMRC will be sending out approximately 850,000 late filing penalty notices for an initial amount of £100. If you receive one of these, do not ignore it! It could easily turn into £1,600!
The deadline for the submission of tax returns for the 2011/12 UK tax year was 31st January 2013 so if you haven’t filed your return on time, it’s time to familiarise yourself with the 2011/12 penalty system for late filing.
Stage 1: A fixed penalty of £100, due immediately after the filing date irrespective of whether a taxpayer has no liability or is due a repayment. This is where we are at the moment - £100.
Stage 2: If the failure to file continues for over three months, the penalty level escalates by a fixed £10 per day up to a maximum period of 90 days. That’s another £900 maximum - sonow we are up to £1000!
Stage 3: Where the failure is prolonged beyond six or twelve months, there are further penalties of either £300 or 5% of the tax liability on the return, whichever is greater. Bingo! £1,600 if your 2011/12 tax return is still not submitted a year later!
So what should you do if you receive a £100 late filing penalty?
There are two ways that you may be able to get out of paying it.
Firstly, HMRC recognises that there will be some people who should not be in self-assessment in the first place. For example; if you were self-employed in prior tax years and ceased self-employment before 2011/12. According to HMRC, if they are contacted with an explanation regarding the circumstances, they will be happy to remove the taxpayer from the self-assessment system and cancel their penalty, where appropriate.
Alternatively, some penalties might be waived on proof of a reasonable excuse, such as a family illness. Each case will be individually assessed and determined on its own merits. However, the dog ate my paperwork won't count! Let’s look at what else HMRC might say is not a 'reasonable excuse:'
Tax return too difficult to complete
They would not accept this as a reasonable excuse. If you have difficulties filing, you should seek help from HMRC or from a tax adviser at an early date.
Pressure of work
HMRC gives plenty of notice of the due date to enable you to arrange matters in order to deal with the tax return on time.
Lack of information
HMRC would not normally accept this. If you cannot obtain certain details you should enter an estimate on your tax return, with an explanation of why the figure has been estimated.
HMRC did not remind you
HMRC normally issues a reminder shortly before the first penalty becomes due. Even if you did not receive this reminder, HMRC would not regard this as a reasonable excuse. The deadline is clearly shown on the tax return or notice to complete a tax return.
Lack of free software
If you sent your tax return late because you didn’t realise the free HMRC Online Services do not cover all forms, they would not agree this as a reasonable excuse.
Failure by agent or tax adviser
HMRC would not normally accept this. It is your responsibility to have your tax return ready on time.
By implication then, anything else is fair game! For further guidance and a late filing penalty appeals form, see HMRC form SA355.
If neither of these get outs applies to you, then you will probably just have to swallow the £100 late filing penalty. But please file your tax return before the fine gets any bigger!
If you have an outstanding 2011/12 UK tax return, please contact us straight away so that that we can advise you on the best way of regularising your UK tax position.