Higher Penalties for Late Tax Returns
Mark Thompson Chartered Accountant Warrington discusses the penalties for late tax returns. One of the main advantages of using an accountant to help you with submitting your self-assessment tax return is that they will assist and prompt you with meeting your statutory filing and payment obligations. So no penalties for late tax returns.
With the changes that HMRC have made to their penalty regime from 6th April 2011, this is now more important than ever.
Starting with the 2010/11 tax year, HMRC has significantly increased the penalty charges that they will impose if you send in your self-assessment tax return late. Their reasoning for imposing these new and extremely punitive penalties is that previous penalty levels were set too low and did not provide sufficient incentive for people to get their returns in on time. More cynical observers might suggest that they have spotted an opportunity to impose yet another form of stealth tax.
HM Revenue & Customs sent a “Notice to complete a tax return” to taxpayers already in the Self Assessment system on 6th April 2011. If you were sent one, you must submit a tax return regardless of your income or gains or whether or not you have a tax liability. Furthermore, if you have a liability to tax it is your responsibility to submit a tax return, even if you have not been asked to do so.
Your personal self-assessment tax return for the tax year to 5th April 2011 must be submitted online to HMRC by 31st January 2012 or by 31st October 2011 if it is submitted in paper form. These deadlines also apply to your separate partnership tax return where you are a member of a partnership. As the deadline for paper tax returns has now passed, you must now submit your return online to avoid being hit by late submission penalties.
For tax returns for earlier years you would receive a penalty of £100 if you submitted your return late. A further £100 penalty would be charged if you were more than 6 months late with your submission. However, the penalties would be reduced to nil if you were due a tax repayment, or all the tax due was paid by 31st January. There was however no reduction for penalties relating to late partnership returns. For 2010/11 tax returns and later years, the penalties for submitting the return late will not be reduced even if all the tax due has been paid on time.
From this year onwards, as well as the initial £100 penalty, the following additional penalties also apply if you are:
- More than three months late submitting your return the penalties are charged on a daily basis at £10 per day for each day that it is more than 90 days late up to a maximum of £900.
- Over 6 months late with your tax return you will be hit with an additional penalty of the higher of £300 or 5% of the tax due.
- Over 12 months late, the same penalty is imposed again.
So if you owe no tax but are more than 12 months late submitting your tax return you will be charged £1600 in penalties (compared to no penalty in 2009/10). If you owed £15000 tax and submitted your return 12 months late you will be charged £2500 in penalties (compared to a £200 penalty for 2009/10).
When a partnership tax return is submitted late, those penalties apply to each partner in the partnership.
Unfortunately the pain might not end there. If you are also late in paying the correct amount of tax you will receive a penalty for paying the tax late. These are also more severe this year and equate to 5% of the outstanding tax due 30 days, 6 months and 12 months after the due date. So if you are more than 12 months late paying £15000 of tax you will be charged further penalties totalling £2250. Interest is also charged on late payments.
In view of these high penalties it is essential that you get your return submitted and your tax bill calculated in good time!
If you need any assistance submitting your self-assessment tax return contact us on 01925 212282 or send an email enquiry here.
(The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive. Whilst it is accurate at the time of publication (November 2011) information contained within it may be out of date.)