HMRC once used the advertising slogan “tax needn’t be taxing.” The reality is, however, that UK tax law is incredibly complex and riddled with deadlines and penalties for non-compliance.
Self-assessment is no different and while HMRC will send you a notification to file a return (by post or by email if you’ve registered for electronic communications), it’s still your responsibility to meet the deadlines for both submitting a completed return and making the appropriate payments of tax.
The key deadlines to note are:
- 31 October for paper tax returns
- 31 January for online returns and the first payment of tax on account as well as a balancing payment from the preceding tax year
- 31 July for the second payment on account.
Act now to avoid a fine
Missing a deadline is not going to lead to your arrest. However, you will be given an automatic £100 penalty for late submission which, after three months, rises by £10 a day. On being six months late you’ll receive a penalty of £300 (or 5% of the tax owing if this is greater). And if you become 12 months late, you will be charged another £300 (or 5% of the tax owing if this is greater).
Paying the tax due late also incurs a penalty plus interest. After 30 days, it’s 5% of tax due; there’s another 5% of tax that’s unpaid due after six months; and a further 5% after 12 months.
If you’ve missed the deadline, you need to file the return – online, not by post – as soon as possible to keep the penalties and interest to a minimum.
Going forward, you need to take steps to avoid missing deadlines again. The starting point is to collect and collate relevant documents in anticipation of completing your return – at the minimum, this means that you’ll have everything to hand that’s needed to meet the deadline; if you’ve not already done so, register with HMRC Online Services. Filing online grants longer deadlines and removes the worry of postal delays. Note, however, that HMRC systems are often overloaded just before deadlines expire – file early if possible.
Here’s an article I wrote with guidance on completing your self-assessment.
Can you appeal?
While compliance with deadlines is non-negotiable, HMRC must consider appeals against the penalties it levies so long as they meet the grounds of a “reasonable excuse”. You can lodge an appeal via GOV.UK
What constitutes a reasonable excuse and so grounds for appeal is strictly limited and includes, for example:
- the death of a close relative before the deadline
- an unexpected hospital stay that delayed compliance with your tax obligations
- a serious or life-threatening illness
- computer or software failure that prevented compliance
- issues with HMRC’s online services
- unpredictable postal delay
- a fire, flood or theft that prevented compliance.
You will need to prove the excuse.
HMRC says it will not accept excuses based on:
- reliance on a third party to submit a return
- payment failure because of lack of funds
- difficulty in understanding HMRC’s online system
- a mistake on the return
- or the lack of a reminder from HMRC.
However, what HMRC says it won’t accept has not always been borne out in tax tribunal judgments.
It’s notable that a reasonable excuse is not defined in law so if you feel that HMRC is being unreasonable you should seek good tax advice, and if appropriate, appeal to the tax tribunal as every case is decided on its own merits. Cases have, for example, been decided in a tax payers favour where HMRC have claimed that a return sent by post had been received late; HMRC couldn’t prove the actual date of receipt. Similarly, a lack of funds may be appealable if you’ve suffered from an issue outside of your control such as client bankruptcy.
It’s also possible to lodge an appeal because of a technicality such as HMRC’s failure to notify a penalty.
Where a reasonable excuse is being made, you must still take steps to comply with your obligations at the earliest opportunity. If you are relying on the grounds of the failure of an accountant to submit a tax return (even though HMRC say they won’t accept this excuse), you need to remedy the situation without delay.
Finally, you may be able to establish a ‘time to pay agreement’ with HMRC where the penalty payment is suspended. However, if the agreement is broken you will be again liable for the penalty. Note that HMRC is obliged to consider if there are any special circumstances that require the penalty to be reduced. If HMRC fails to make such considerations their decision to impose a penalty is flawed and can be appealed.
Visit HMRC’s website for contact information.