Q: We are currently in the process of completing a client’s self-assessment tax return but they have not supplied me with the relevant information. As the deadline is now fast approaching, we believe the self-assessment tax return will now be submitted late. What penalties are currently in force for late submission?
A: The deadline for submission of self-assessment tax returns for the tax year ending 5 April 2015 is the 31 January 2016. If your clients return is submitted after this date, he will be liable to a fixed late filing penalty of £100.
The next penalty charge will come into force if the return remains unfiled after 3-months following the deadline, in other words after 30 April 2016. If the return remains outstanding at this point, HMRC will begin to impose daily penalties of £10 per day for a maximum of 90 days (maximum £900).
Tax geared penalties equal to 5% of the tax liability due, or £300 if greater, will be issued if the return is submitted over 6 months late (after 31 July 2016) and over 12 months late (after 31 January 2017). It should be noted that if the return is over a year late and HMRC view that the delay has arisen because of the taxpayers deliberate choice to withhold information, the penalty can increase to a maximum of 100% of the tax liability due (or £300 if higher) where the action has been deliberate and concealed.
The penalties for late returns are cumulative and can produce a hefty bill even if your tax liability is low. For example, if 5% of the potential tax liability is £150, the charge at 6 months and 12 months would be £300 under these rules. As an example, this means that if a return is submitted later than 12 months, the client will need to pay a total of £1,600 (£100 + £900 + £300 + £300).
In addition to the penalties for late filing, HMRC also apply charges where payment of tax is late. All balancing payments for the 2014/15 tax year should have been paid by 31 January 2016. However, if the tax remains unpaid for 31 days after the original due date then HMRC will apply an additional charge of 5% of the tax liability which was due.
An additional 5% charge will become due if the tax liability remains unpaid at the end 6 months and/or 12 months.
If any of these liabilities remain unpaid, interest will accrue from the original payment date. This applies to both the balancing payments and payments on account.
It is therefore crucial that your clients tax return is submitted on a timely basis and by the specified filing dates otherwise failure to do so and result in unnecessary costs.