Q. Traditionally in previous years I have submitted my self assessment return to H M Revenue & Customs (HMRC) after the 31 January filing deadline making it a late return. The penalty of £100 in force wasn’t sufficient reason for me to ensure I met the deadline. I have been told that for the 2011 self-assessment return due to be filed with HMRC on or before 31 January 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 but increasing minority fail to meet the deadline each year particularly those who had no tax liability or expected refunds of tax.

The new penalty regime for late filing and late payment of income tax via Self Assessment started on the 6 April this year. Taxpayers who fill in Self Assessment tax returns would have received their 2011 paper returns or notices to file in April 2011. These returns and notices included information on 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 attract a penalty of at least £1,300!

A spokesman for the HMRC was quoted as 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 the 6 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 per cent of tax due or £300
• Twelve months late: you will be charged yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases you face a
higher penalty of up to 100 per cent 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 per cent of the tax unpaid at that date
• Six months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
• Twelve months late: you will be charged a further penalty of 5 per cent 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.

The message is clearly one that if you are to avoid unnecessary charges it is essential that you ensure your 2011 and future self-assessment returns are submitted on or before 31 January each year.

If you need any further help please call the TaxWise Advice Service on 01455 852555 and one of our specialists will be happy to help.