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File your tax return on time or risk penalties of hundreds of pounds

Imaginative excuses won't protect you from punitive measures if you have neglected to file your tax return by 31 January.

Your mother-in-law putting a curse on you because she’s apparently a witch or being too cold because your boiler broke down are some of the outrageous excuses offered to HM Revenue & Customs (HMRC) by people who claim they cannot file their tax return in time – but anyone who doesn’t file by 31 January could face a penalty and serious fines.

Nimesh Shah, a partner at Blick Rothenberg said, “Whilst HMRC have revealed some lighthearted excuses for failing to file a tax return on time, there is a serious message for people who haven’t yet filed their tax return.”

He added, “If you do not file your tax return by 31 January, HMRC will issue an automatic fixed penalty of £100. If the tax return is three months late, HMRC will start charging daily penalties of £10 per day and these run for a period of up to 90 days, so up to £900 in total. After six months, HMRC will charge a penalty of 5% of the person’s tax or £300 – whichever is higher. Therefore, within six months, someone could be facing total penalties of at least £1,300. The penalties start to become even more serious if the tax return is more than 12 months late and can be as much as 200% of the tax. HMRC will charge these penalties even if the person doesn’t actually have any tax to pay.”

In addition, if a person doesn’t pay their tax on time, HMRC will charge daily interest at 3%. Furthermore, if you don’t pay the tax by 2 March, HMRC will charge a penalty of 5% of the tax and further 5% penalties are levied if the tax is unpaid at six months and 12 months.

By way of example, if someone doesn’t file their tax return until 1 June and they calculate they have tax to pay of £1,000, they could be facing an additional bill of penalties and interest of just less than £500, which is nearly as half as much of the tax owed in the first place.

Nimesh said, “This can be important if HMRC raise an enquiry and discover a tax underpayment, as they may agree to suspend any penalties given the taxpayers previous positive record of meeting the relevant deadlines. Therefore, it is not only the financial implications of missing a deadline, but thought should be given to HMRC perception.”

HMRC are increasingly focusing on good taxpayer behavior and missing a filing deadline or paying tax late can negatively impact your record.

He added, “HMRC do allow for legitimate occasions where a person cannot file their tax return on time. If you have a ‘reasonable excuse’ HMRC can, at their discretion, accept the late filing of a tax return. However, ‘reasonable excuse’ is not specifically defined in law and an HMRC officer would look at each case on its own facts. In my experience, it is rare HMRC will extend the deadline, but a sensible example may include serious illness or family bereavement.’

For more information, contact Nimesh Shah.

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