31 January tax return filing deadline February 2018

You may have read reports in the press recently stating that automatic ‘computer-generated’ penalties issued by HM Revenue & Customs (HMRC) for late filing of Tax Returns are ‘not legal’. This followed a Judge’s comments in a recent first tier tribunal hearing. It was reported, somewhat surprisingly, that HMRC are not choosing to appeal this decision but time will tell whether this means that HMRC will have to review their systems for imposing penalties and whether the current penalty regime will remain in place.

Until then, the status quo prevails, so if HMRC sent you a notice to complete a Tax Return shortly after 5 April 2017, but you have not yet filed this, then there will be an automatic £100 penalty that you will have to pay, even if there is no tax payable or if you have already paid all of the tax that you think you might owe.

In some circumstances you may have slightly longer within which to file your Tax Return. This may apply, for example, if HMRC have recently issued you with a notice to complete a 2016/17 Tax Return. If that is the case then you usually have three months after the date of such notice within which to prepare and file your Return.

Bear in mind however, that there are strict timescales within which you are required to notify HMRC of chargeability to tax and the requirement for you to register for self-assessment. This time limit is six months after the end of the tax year in question i.e. 5 October 2017 for the 2016/17 tax year. If you know you should have registered for self-assessment in respect of 2016/17 but have not yet done so, you should take action sooner rather than later. Penalties for late registration can be levied and these can be as much as 100% of any tax liability unpaid at 31 January following the end of the tax year.

At present the maximum penalty for most people who have not yet submitted their 2016/17 Tax Returns will be the flat rate penalty of £100. There will, however, be interest charged on any tax which has not been paid by 31 January 2018 (including any payment on account toward your 2017/18 tax liability, if that applies to you). That interest will be charged at 3% per annum and it is worth noting that any tax which remains unpaid at 2 March 2018 (30 days after the deadline) will incur a further 5% surcharge.

February 2018 The above penalties and potential interest may already seem punitive enough, but if your Tax Return was due to be submitted by 31 January 2018 and is still not submitted by 30 April 2018 then even more significant penalties are levied at the rate of £10 per day (up to a maximum of £900).

There are further penalties levied if the Return is more than 6 months late (£300 or 5% of the tax due, whichever is the higher, in addition to the penalties mentioned above) and if the Return is more than 12 months late (an additional £300 or 5% of the tax due, whichever is the higher, and in serious cases can be as much as 100% of the tax due). Similar surcharges of 5% are also applied to late payment of tax if the tax remains unpaid after 6 months and 12 months in addition to the 5% surcharge if the tax is not paid by 2 March 2018.

As I am sure you will appreciate, because of the potentially significant penalties referred to above, it is much better to try to bring matters up to date as soon as possible, even if you have missed the 31 January 2018 filing deadline. Please contact us if you would like any assistance with bringing your tax affairs up to date or if there is anything else you would like to discuss.

HMRC do have the ability to cancel late-filing penalties if you can demonstrate that you had a ‘reasonable excuse’ for not filing your Tax Return on time. There is no definition of ‘reasonable excuse’ for these purposes but if you feel you have genuine grounds for failing to meet the deadline, it may be worth writing to HMRC and attempting to appeal against the fine. However, you should be aware that generally HMRC will require your Tax Return to be submitted before they can consider any appeal against late filing penalties.

It is also worth pointing out that late submission of your Tax Return can have other, perhaps less immediate, financial implications which can include invalidating any insurance policy which you may have in place for professional fees arising on any tax enquiry that HMRC undertake in respect of your tax affairs. You may therefore want to read the small print of any such insurance policies very carefully