Q. In the past I have regularly submitted my self assessment return to H M Revenue & Customs (HMRC) late after 31st January filing date. The penalty of £100 wasn’t a sufficient reason for me to ensure I met the deadline. I have been told that for the 2011 return I have just received I could face much higher penalties if I fail to submit it on time. Is this correct and what are the maximum penalties I could now face?
A. Most people file their tax return on time however a small majority fail to meet the deadline each year, particularly those who had no liability or expected refunds of tax.
The new penalty regime for late filing and late payment of income tax via Self Assessment started on 6th April this year. Taxpayers who fill in Self Assessment tax returns will recently have received their 2011 paper returns or notices to file. These include information regarding the new penalty regime and how it will significantly increase penalties for those who file and pay late. A tax return filed six months late could lead to a penalty of at least £1,300.
A spokesman for the HMRC has recently been quoted saying “The vast majority of people don’t have to pay penalties because they send in their return and pay on time. But there are always a small number of people who have avoided filing or paying on time. HMRC spends a lot of time pursuing late returns and getting involved in unnecessary appeals work. We want to focus our resources on more productive work such as catching criminals and collecting tax. The old £100 penalty was not much of a deterrent and these new penalties, which increase over time, will get people to submit returns as soon as possible. Basically the greater the delay, the greater the penalty.”
From 6th April 2011 the new penalties for late self assessment returns are as follows;
• Day one: you will be charged an initial penalty of £100, even if you have no tax to pay or you have already paid all the tax you owe
• Three months late: you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
• Six months late: you will be charged further penalties, which are the greater of 5% of tax due or £300
• Twelve months late: you will be charged yet more penalties, which are the greatest of 5% of tax due or £300. In serious cases you face a higher penalty of up to 100% of the tax due.
The Penalty regime for paying your tax late is as follows;
• Thirty days late: you will be charged an initial penalty of 5% of the tax unpaid at that date
• Six months late: you will be charged a further penalty of 5% of the tax that is still unpaid
• Twelve months late: you will be charged a further penalty of 5% of the tax that is still unpaid
These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until your payment is received.
HMRC, as part of their continuing drive to improve compliance in all areas of taxation have stated that penalties will be automatically sent to all Self Assessment taxpayers who do not file and pay on time. You will still be able to appeal against any penalty on the grounds that they have a reasonable excuse for not complying on time. All penalty notices issued will include an appeal form and details on how to appeal.
TaxWise is available to help answer any tax queries. Just call the Advice Service on 01455 852555 and one of our specialists will be happy to help.