HMRC have issued penalties totalling £860 million to taxpayers who were late filing their tax returns or paying their tax liabilities. This represents an increase of 24% from the £694 million received in 2017-18 tax year and an even larger increase from the £667million the year before. Resulting perhaps from the current economic climate it is thought that around 700,000 taxpayers missed the original January 31 deadline for the filing of returns and payment of tax.
Failure to file your return by this date triggers the automatic £100 fine and from 1 May 2019, additional penalties of £10 per day, up to a maximum of £900 for outstanding returns still not submitted by that date.
Penalties for failure to submit a return then increase again by 5% of the total tax bill, or £300 depending on which is greater, for defaulting taxpayers who have still omitted to after six months; and after 12 months, an additional 5 per cent or £300 charge applies, whichever is greater.
In addition to these late filing penalties, HMRC can charge separate late payment penalties of 5% where the tax due still has not been settled within 30 days of the due date, and again within 6 months of the due date and 12 months of the due date. Furthermore, HMRC are also able to double the tax bill if they believe a payment is being deliberately withheld. So, with HMRC are coming down strong and issuing the highest bills possible to some erring taxpayers, the surge in income cannot be totally unexpected.
All this taken together provides clear evidence that HMRC are focusing on ensuring they receive tax returns and the resulting tax liabilities on time. Not meeting the 31 January deadline can be costly even where the resulting liability is small. And, even where the liability can’t be settled in full the return should be submitted on time.
Where the liability can’t be settled in full, early communication with HMRC is key to avoid the relatively harsh penalties outlined above. HMRC do grant time to pay agreements when a taxpayer is able to provide a clear explanation for and evidence of an inability to pay, and is able to commit to a sensible payment plan.
We have helped a number of clients avoid these penalties so if you feel you may be in this position with respect to your 2018/19 filing, contact your usual Everfair Tax advisor or get in touch with our friendly team as soon as possible to see how we can work with you to resolve the problem.