People are of course not keen to be part of the statistic that sees annual contributions of tens-of-millions of pounds to the Exchequer for late filing of personal tax returns.
Missing the filing deadline incurs an automatic late filing penalty of £100. Penalties of £10 per day (up to a maximum of 90-days) apply to unfiled tax returns from 1 May 2019. There are further penalties of at least £300 if the return is filed six months or 12 months late.
A late filing penalty is unwelcome, but it is important not to lose sight of other related matters while battling through to the deadline.
Personal circumstances should be checked to see if they have changed; there may be scope to ask HMRC to withdraw the tax return. This should prevent a penalty or cancel one that has already been issued.
The filing deadline for paper returns was 31 October 2018. However, this does not apply if it is not possible to file electronically due to entries on the tax return being within one of the exclusions on the HMRC list. Where this applies, a reasonable excuse should be sent to HMRC together with the paper return. Otherwise automatic penalties will be issued, which will need to be appealed.
Even if individuals are missing some information, this should not prevent the submission of an estimated or a provisional tax return. Where estimated figures are used this should be made clear on the tax return and a white space note is recommended. The tax return should be marked as provisional where more information is expected to be received. The white space note should detail what is missing and when the information is expected to be available.
There are potentially greater penalties that need to be considered. Where any tax for the year ended 5 April 2018 has not been paid by 2 March 2019, there is a late payment penalty of 5% of the tax unpaid. This late payment penalty does not apply to unpaid payments on account for the 2018/19 tax year.
If people are experiencing cashflow difficulties and are doubtful of having sufficient funds to pay the outstanding tax for the 2017/18 tax year by 2 March, they can apply to HMRC for a ‘time to pay’ arrangement. While HMRC are sympathetic to taxpayers who are experiencing genuine financial difficulties, it is imperative that these individuals contact HMRC as early as possible to reach an agreement with it. Agreement is not automatic, and taxpayers will need to demonstrate their situation is genuine and outside their control.
Where HMRC and the taxpayer reach agreement on spreading tax payments, and payments are made in line with the agreement, the late payment penalty provisions should not apply. However, interest will continue to apply from the normal due date.
There may also be taxpayers who have not yet registered for self-assessment. Registration should have been completed by 5 October 2018 for the tax year ended 5 April 2018. There are penalties for late registration that can be up to 100% of the potential lost revenue (PLR). The level of penalty will depend on whether the failure is deliberate or not and if it has been concealed.
The PLR for late notification is the amount of tax unpaid at 31 January 2019. If a reasonable estimate of the tax due can be paid on or before 31 January, this should prevent a penalty arising.
Although people might not have received their unique tax reference, they can make a payment using their National Insurance number as a reference. HMRC may need to be contacted afterwards to re-allocate the payment from a suspense account to the individual’s self-assessment record.
Deadlines are important and help keep the tax system running. However, each deadline should be kept in perspective as the penalties and ways to prevent them vary significantly.
Guy Sterling is a tax partner at Kingston Smith