For those who missed the deadline and failed to submit their return on time HMRC have recently issued around 900,000 penalty notices. Taxpayers started receiving the notices with effect from 20 February.
HMRC statistics show the number of SA taxpayers who missed the 31 January deadline has grown rapidly in the last six years. In 2004-05, 876,000 people missed the deadline, rising to more than a million by 2006-07 and reaching 1.4 million in 2009-10.
As a result of this increase the new penalty regime was designed in an attempt to try and halt this upward trend and has the following four stages:
• £100 fine from 3 February (31 January deadline was extended due to HMRC strikes)
• £10 a day fine from 1 May for 90 days – a maximum of £900
• £300 fine on 1 August (or 5% of the tax due if that is more)
• £300 fine on 1 February the following year (or 5% of the tax due if that is more)
The filing date for returns sent in on paper was 31 October, so the dates at which fines apply are also three months earlier than those for online filers. If a taxpayer has not filed their 2010-11 return yet, they should file online now. Anyone filing a paper return will immediately be fined £100 along with daily penalties for being more than 3 months late for 31 October paper deadline.
It is important to remember that fines are no longer capped at the tax owed; therefore taxpayers could face fines of up to £1,600, even if they owe nothing.
The figure of 900,000 penalty notices represents a 36% drop from the 1.4m issued last year, indicating that HMRC’s advance publicity on the new penalty regime has been successful in reducing late filing.
Last year a huge number of the 1.4 million notices issued were rescinded because the tax was paid, resulting in no penalties payable.
As in previous years, some notices will be cancelled due to reasonable excuse appeals, but potentially most of those 900,000 taxpayers will be liable for a minimum penalty of £100 this year, resulting in a £90m windfall for the government.
For those considering appealing against a penalty notice the law allows people who have a reasonable excuse to be excused a penalty for submitting their tax return late, but the law does not provide a detailed definition of what constitutes a reasonable excuse.
The basic test to be applied is that you behaved as any reasonably responsible person would have done in the circumstances. This means that you were aware of the need to give time to preparing and submitting your tax return but, despite trying to meet your responsibilities, you were prevented by events or circumstances from meeting the deadline. It is important that you filed your tax return as soon afterwards as you were able to.
HMRC will not consider whether you have a reasonable excuse until after you have submitted your tax return.
For any further information on any of the issues outlined in this piece, please call the Advice Service on 01455 852555.