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Business advice from Griffins – Ray Honeywill answers your questions
I have recently been told that if I don’t send my tax return back by the end of October, I will receive a penalty charge from HMRC, is this correct? Steve
Dear Steve
HM Revenue and Customs has new powers in relation to penalties for late returns.
We have now passed the deadline for filing tax returns for the year to April 5 2011 in a paper format with HM Revenue and Customs.
This means that you now need to file any return which has not yet been dealt with by either an electronic submission or online.
The filing deadline for such electronic returns is January 31 2012.
In previous years, if the return was not filed by the due date HM Revenue and Customs were in a position to charge a penalty of £100 for non submission of the return and once that return was filed if there was no liability there were then provisions to have that penalty reduced to zero.
Under the new penalty regime which bites for tax returns for the year ended April 5 2011, the initial penalty for failure to submit the return still remains at £100.
If the return then remains outstanding for three months, daily penalties are charged at the rate of £10 per day capped at a maximum of £900 per return per year.
After a six month delay a further penalty is incurred which will be the greater of five per cent of the tax due for the year or £300.
A delay of 12e months results in a further penalty of a further five per cent of the tax due or £300.
By way of example, if you were required to file an online return by January 31 2012 but failed to do so until August of 2012 (seven months late) penalties of £1,300 will be charged by HM Revenue and Customs even if there is no liability.
If there was a liability then the amount could in fact be considerably higher if we took into account five per cent of the tax due.
Furthermore it should be noted that once the return is filed if there is in fact no liability the penalties remain and are not cancelled.
This new penalty regime affects both individuals and partnership returns and where a partnership return is filed late each and every partner will be liable to a late filing penalty in respect of that partnership return.
In addition to the above it should be noted that new provisions have been introduced regarding the late payment of tax due under the self assessment system:
n five per cent charge on liabilities outstanding 30 days after the due date.
n A further five per cent on liabilities outstanding 6 months after the due date.
n A further five per cent on liabilities outstanding 12 months after the due date.
n In addition interest runs on outstanding tax.
This new system is a marked change from the comparatively lenient penalty system that previously applied to the late submission of returns.
Bearing in mind that returns now have to be filed electronically and there can be hiccups, the general advice is that the sooner the filing is made the better. It is most unwise to leave filing until the last couple of weeks in January. Computer failure, loss of information and all other sorts of things can catch the unwary out and incur significant penalties.
It is hoped that this article will act as a timely reminder for those who have not yet addressed the issue of completion of their tax returns for the year toApril 5 2011.
For more information on this or any other tax queries contact Ray Honeywill, tax partner on (01635) 265265 or email r.honeywill@griffins.co.uk.
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