Over the past year, we've seen several deferments and extensions, to help businesses and people cope with the demands of the pandemic, without falling behind with their tax obligations.
However, assuming that the self-assessment tax return deadline, which falls on 31st January 2021, is also 'flexible' this year would be incorrect!
HMRC is offering some concessions, in that they will consider a 'reasonable excuse' as to why some returns have not been submitted before the cut-off.
Provided you can demonstrate such as justification, and then file your return as quickly as possible; there is the potential that HMRC will waive a late filing penalty.
Unfortunately, that DOES NOT apply to late payments of tax obligations, so it is as vital as ever to get your affairs in order before the end of the month.
HMRC Concessions on 2021 Self-Assessment Returns
The UK tax office has indicated that, on a case-by-case basis, they will consider applications for exemption from late filing penalties where there is evidence of business disruption.
One of the challenges here is that there is no prescribed list of the 'reasonable excuses' they will accept. So, failing to file your return on time is taking a substantial risk that HMRC will also allow this as a valid reason whatever the difficulties you are facing.
Typically, the sorts of scenario that will allow you a little breathing space on filing deadlines include:
- Death of a partner or immediate relative close to the deadline.
- An unexpected hospital stay, again close to the filing cut off.
- Serious illness, or a life-threatening incident.
- Digital software errors, sometimes accepted if your PC has crashed irreparably immediately before filing.
- Problems caused by HMRC online services.
- Disasters such as fire, flooding, or theft that have impacted your ability to file.
- Issues with the postal system causing delays for paper returns.
- Disability-related problems.
That is not an exhaustive or comprehensive list, so if you are sure that you will not be able to file your self-assessment tax return before, or on, 31st January, we recommend contacting HMRC as soon as possible to check their position.
What Will I Be Fined if I File my 2019/20 Tax Returns Late?
As we've seen, a lot depends on the reasons for the late filing, and whether HMRC accepts the explanation. However, it's also essential to understand that, while there is a possibility that you will be able to avoid late filing penalties, you will very likely still be charged a fine for late payment.
Many people file their tax return and pay the arising liability simultaneously, although you may have overpayments from previous years or payments on account. If there is no liability payable, or you are claiming a refund, you will not be subject to late remittance charges.
That said, if you do have tax to pay, you will start to incur penalties from 30 days after the filing deadline. For self-assessment returns, the filing date is 31st January, and payments are due at the same time.
Usually, you will not be fined until 30 days later, so in 2021 penalties will be issued, and begin accruing interest, from 2nd March.
Typical fines work as:
- £100 instant penalty for missing the 31st January filing deadline.
- £10 per day additional fines after three months have passed.
- Maximum late filing penalty is £900.
- Charges of 5% of the amount owing, or £300 (whichever amount is larger) after six months of failure to file a return, and again after 12 months.
You can contact HMRC for advice, but they cannot usually grant an allowance in advance. Therefore, even if you are advised that your reason for late filing is likely to be permitted, you will still be issued with a fine and need to raise an appeal.
Should you be charged other penalties, these usually need to be appealed by post, rather than through your online Government Gateway tax account.
Is HMRC Going to Fine People for Late Self-Assessment Tax Payments?
In short, yes. If you manage to be excused from a late filing penalty, you will still be fined for a late payment if you owe tax. The appeals process applies, although there are less likely to be unusual exemptions in place.
As with late filing penalties, the amount you will be charged for a late payment depends on how quickly you bring the account back into good order:
- After 30 days, you are fined 5% of the amount owing.
- After six months, you are charged another 5%, and again after 12 months.
This does allow for a little extra time, so if you can file your return by 31st January but cannot make the tax payment simultaneously, you have 30 days to pay this in full to avoid a fine.
Please note that where payments on account have been given an additional six months to pay, this extension expires on 31st January, unless you have made individual arrangements with HMRC.
Usually, the payment on account will be for approximately 50% of your 2019/20-tax liability.
What Can I Do If I Cannot Pay my Self-Assessment Tax Liability on Time?
The best thing to do is take action now, where you have a couple of weeks left to make arrangements.
HMRC offers the Time to Pay programme, whereby you can request a repayment plan. This option is usually available to people who owe between £32 and £30,000 and can spread your tax bill over up to one year.
It is still critical to file your return on time, and contact HMRC within 60 days to request a repayment plan, so this option doesn't give you an indefinite deadline, nor is it guaranteed that HMRC will grant a Time to Pay application.
The critical thing to remember is that HMRC is stridently pursuing tax liabilities owing, in a bid to recoup at least some of the significant expenditure the government has made in response to the Coronavirus pandemic.
While there are some allowances available, HMRC is not always obligated to offer you any support outside of the existing systems. Making sure you file your tax return, and make your payment in time, remain essential to avoiding fines, penalties, and future problems.
If you haven't yet filed your 2019/20 tax return, are struggling to prepare your figures in time for 31st January, or suspect you will have issues with paying your tax on time, get in touch with the SAS Accounting team as soon as possible to enable us to help you form a plan, and hopefully bring everything back up to date.