Penalty if your tax return late

HMRC DEADLINE APPROACHING

WITH the January 31 deadline fast approaching, there are just days left for the UK’S 5.4m taxpayers to submit their Self-assessment tax returns.

With 2020 having been a year like no other and specifically taking into account the impact of the Covid-19 pandemic, what can you do if you miss the deadline?

Michael Wallace, legal adviser at DAS Law, has the following advice:

In general, the penalties for failing to file your return on time are automatic and fixed: there is an initial penalty of £100 and, if you are more than three months late, the charges will be £10 per day – charged, once the return is three months late, for a maximum of 90 days.

There is a section on the Government website that allows you to estimate the penalty based on the amount, time taken to pay and interest.

But what if you have good reason to file your return late? Suppose your business is recovering from a fire or you have suffered flooding?

1) HMRC says that a reasonable excuse for missing the deadline is “… normally something unexpected or outside your control that stopped you meeting a tax obligation.”

HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations such as payments or filing dates but it will be up to you to show how coronavirus has affected you in the appeal. There is still an expectation for you to make the return or the payment as soon as possible.

2) Excuses that HMRC will not accept include: you relied on someone else to send your return and they didn’t; you found HMRC’S online system too difficult to use; you didn’t get a reminder from HMRC.

3) HMRC will amend or cancel a penalty for late filing in cases where the taxpayer can show that there was a reasonable excuse for failing to file on time. However, that excuse needs to have prevented the taxpayer from filing a return over the whole period – in other words, it must have applied continuously.

4) If you are still waiting for information to complete a return, it is entirely legitimate to make a reasonable estimate of the income or gain and then amend the return when the information becomes available. There is no penalty for amending a return, though there is a time limit for doing so.

5) Taxpayers have the right of appeal in respect of penalties charged and have the opportunity to argue their case in front of a tax tribunal.

Don’t forget, it isn’t just the selfemployed who need to complete a tax return; if you received £2,500 or more in rental income or if your savings or investment income was £10,000 or more before tax, you will also need to fill out a tax return. A full list is available from HMRC.