Due to the self-assessment filing deadline of 31st January being last month, Your Tax Shop would like to take this opportunity to explain to clients the penalty regime that HMRC impose that will apply if their tax returns have not been filed on time or are yet to be filed.

HMRC issue at least 1 million late filing penalties based on recent years. We cannot stress enough how important it is to be ahead of the game and organised in terms of being organised and getting your tax return filed in a timely manner.

So, what do the penalties actually relate to? There are two types of penalties to be considered:

  1. 1. Late filing penalties
  2. 2. Late payment penalties

Late filing penalties are as follows:  

  • – Immediate £100 penalty after the filing due date. This applies even if there is no tax to pay, and whether or not the tax has been paid by the due date i.e. you will still be issued a penalty even if you have paid the tax due but forgot to submit your tax return!
  • – Daily penalties of £10 per day for returns that are submitted more than 3 months late after the filing due date, running for a maximum of 90 days
  • – If the tax return is still outstanding 6 months after the filing due date, a further penalty of 5% of the tax due for the tax return period or £300, whichever is greater, will be imposed
  • – If the tax return is outstanding for 12 months after the filing due date, a further penalty of 5% of the tax due for the tax return period or £300, whichever is greater; and
  • – Higher penalties of 70% of the tax due where a person fails to submit a tax return for over 12 months and has deliberately withheld information necessary for HMRC to access the tax due (increasing to a 100% penalty if deliberate with concealment).

Late payment penalties are as follows: 

  • – Penalties of 5% of the amount of tax unpaid, issued 30 days after the payment due date
  • – Further penalties of 5% of any amounts of tax still unpaid at 6 months
  • – Further penalties of 5% of any amounts of tax still unpaid at 12 months

Appealing penalties issued – Reasonable excuse

Penalties can be contested, and avoided in most cases, if the taxpayer has a ‘reasonable excuse’.

The below situations are what HMRC may consider as a reasonable excuse:

  • – Where the deadline was not met because the taxpayer did not receive the return
  • – Where the return was posted in good time, but an unforeseen event disrupted the postal service
  • – Where the taxpayer lost their records as a result of fire, flood or theft
  • – A close relative or domestic partner died or had a serious illness shortly before the deadline
  • – Where the taxpayer is in prison

There are also some situations that HMRC will not accept as a reasonable excuse which are as follows:

  • – The tax return is too difficult to complete
  • – Pressure of work
  • – Failure by the taxpayer’s agent
  • – Lack of information to complete
  • – Absence of reminders from HMRC

If HMRC agrees with the appeal the penalty will be removed, however, if HMRC does not agree, it is possible to challenge HMRC’s decision and an appeal can be taken to the First-Tier-Tribunal.

Did you know… HMRC can suspend late payment penalties when the taxpayer contacts HMRC in a timely manner and agrees a Time to Pay arrangement whereby the tax is paid over a period of time.

Have you been issued any late filing or late payment penalties by HMRC? If so, get in touch with Your Tax Shop, a local multi-award-winning accountancy practice based in Ashton-under-Lyne, and we will be happy to help!

Should you require any further information regarding self-assessment penalties then please do not hesitate to get in touch by contacting us on 0161 339 5689.