Daily penalties of £10 will soon hit those yet to submit their 2016/17 Self-Assessment tax return form. It has led the Low Incomes Tax Reform Group (LITRG) to warn people in this position to file their return before the end of April in order to avoid the daily penalties accruing.
While anyone who did not file their tax return by the 31 January 2018 deadline will already have been charged a penalty of £100, they will also have to pay a daily penalty on top of that if it is more than three months late: for online returns with a 31 January 2018 filing date that would be from 1 May 2018.
The £10 daily penalties continue to be chargeable for up to 90 days unless the taxpayer submits their return within that time.
About 10.7 million people submitted their annual tax returns by midnight on 31 January 2018 but HMRC estimate that 745,588 people missed the deadline.1
Robin Williamson, LITRG Technical Director, said:
“If a tax return for 2016/17 has still not been filed by 31 July 2018, the initial penalty of £100 and the daily penalties chargeable will amount to a total of £1,000, in addition to which a further penalty of at least £300 becomes chargeable. These automatic penalties take no account of the amount of tax an individual owes – even if you owe nothing or are owed tax back.
‘’If you have registered for Self-Assessment you must submit a tax return or inform HMRC that you no longer fall under the Self-Assessment criteria and ask them to agree to cancel the requirement for the tax return. If they do this, then any late filing penalties will also be abated.
“If someone believes they do not need to be in Self-Assessment, for example because their taxes are fully dealt with under the Pay As You Earn system or simple assessment, or because they have left the UK, they should be able to ask HMRC to withdraw the notice to file a tax return. Such an application must be made within two years of the end of the tax year to which the return relates.
“Even if they cannot get HMRC to cancel the requirement for the tax return to be filed, late filing penalties can be appealed if there is a reasonable excuse for filing late such as prolonged ill-heath, bereavement or family breakdown.”
Late submission penalties
· £100 – applied immediately the form is late
· £10 per day – charged once the return is three months late for a maximum of 90 days
· The higher of £300 or five per cent of the tax due – applied if the form is six months late; and
· A further £300 or five per cent of the tax due (whichever is higher) – applied if the form is 12 months late
Those who should have registered for Self-Assessment for 2016/17 but have not yet done so, do not fall under this penalty regime. Specific rules apply to such ‘failure to notify’ cases – penalties are based on the amount of tax lost as a result of the failure to notify and are stepped according to whether or not the failure is deliberate and the quality of any disclosure.
For example, if someone needs to file a 2016/17 tax return to tell HMRC about a new source of taxable income and the reason they did not tell the tax authority by the 5 October 2017 deadline was neither deliberate nor concealed (for example, it may have been careless or a genuine mistake), then HMRC can charge them 30 per cent of the tax due, as a penalty. If there is no tax lost, then as a matter of fact, there cannot be any penalty. If someone tells HMRC about their failure and generally co-operate with them to quantify the tax due, then HMRC can reduce the penalty. If they told HMRC about the failure without the tax authority having to prompt them, the penalty chargeable could be as low as zero per cent provided HMRC are told within 12 months of the tax becoming due. Failure to notify penalties can also be cancelled on grounds of reasonable excuse.
Robin Williamson said:
‘’The best thing to do is to inform HMRC of your need to complete a tax return and get the tax return in as soon as possible’’.
Notes for editors
1. On-time Self Assessment returns break the record again – HMRC press release (February 2018)
2. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)More Articles by Chartered Institute of Taxation (CIOT) ...