With 31 January deadline fast approaching, HM Revenue and Customs (HMRC) has warned that 5,542,000 taxpayers have still to complete their Self-Assessment tax returns.
But what can you do if you miss the deadline? Hannah Parsons, a Principal Associate Solicitor at DAS Law, tells you what you need to know…
The penalties for failing to file your tax return on time are automatic and fixed: there is an initial penalty of £100 and after three months, a further £10 per day is charged for up to the next 90 days. Then after six months, the penalty rises even further to include 5% of the underlying tax due - and it doesn’t stop there.
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. Reasonable excuses
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.”
- the recent death of a partner
- an unexpected stay in the hospital
- computer failures
- service issues with the tax authority’s online services
- a fire that prevented the completion of a tax return or postal delays.
2. Excuses that won’t be accepted
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. If you have a disability
If you have a disability and claim to have a reasonable excuse that prevented you from meeting a deadline, HMRC will consider whether you made a reasonable effort to file on time.
4. Getting a penalty cancelled by HMRC
HMRC will 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.
For example, your case will be considerably weakened if you have actually worked and received taxable income during the period of the delay. HMRC might well argue that, if you were well enough to work, you were well enough to complete your tax return.
5. If you are still waiting for information
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.
6. Appealing against a penalty
Taxpayers have the right of appeal in respect of penalties charged and have the opportunity to argue the case in front of a tax tribunal.
Don’t forget. It isn’t just the self-employed 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.
Disclaimer: This information is for general guidance regarding rights and responsibilities and is not formal legal advice as no lawyer-client relationship has been created.