I would not rely on HMRC’s show of leniency, and taxpayers should aim to file their 2019/20 tax return by the 31 January deadline. There could be wider implications for their personal tax affairs if they don’t.
The £100 late filing penalty is relatively modest, but people should think very carefully before deciding to file their tax return late.
HMRC are suggesting late filers who receive the automatic £100 fine can appeal it and it will be dismissed. However, it will take time to appeal and it is never guaranteed that HMRC will accept the appeal, despite their apparent show of sympathy.
In addition, HMRC will inevitably be inundated with appeals so it could be several months before the penalty is reversed.
It is positive that HMRC acknowledge the immense challenges of home-schooling under the latest lockdown, and that parents will be very time constrained in January to file their tax return – I doubt we will see such sympathy from HMRC ever again. In normal times, they would only accept situations of severe hardship as a ‘reasonable excuse’ to avoid the late filing penalty. In the past, HMRC have cited examples of ‘reasonable excuse’ as including bereavement of a close relative or serious illness which prevented you from filing your return on time.
If you can find the time between work and teaching, I would encourage people to file their tax return by 31 January.
You may have tax to pay by 31 January in any case, which you would only know if you complete your tax return and the calculations. HMRC will still want the tax and any late paid amounts will attract daily interest at 2.6% and a 5% surcharge if not paid by 2 March. It is technically far more difficult to appeal these charges. I don’t think they will apply the same leniency with these charges.
When a return is filed late, the HMRC enquiry window is automatically extended. For example, if a return is not filed until (say) 1 March 2021, HMRC will have until 30 April 2022 to raise an enquiry under their standard timeline.
I think there is a lot to be said for ‘good taxpayer behaviour’ by filing your return on time – if you have a HMRC issue in the future, they can look at your past filing and payment history and a clean record can hold some weight.
Self-employed individuals should file their return by 31 January, as they risk being excluded from future Government support. When the Self-Employment Income Support Scheme (SEISS) was originally announced last March 2020, the eligibility was contingent on having filed the 2018/19 tax return. At the time, the Government allowed a grace period until 23 April 2020 for unfiled 2018/19 tax returns, but they may not be as lenient now.
Those wanting to apply for a tax payment deferral up to £30,000 are only eligible if they do not have any outstanding tax filings. This was a specific scheme announced by the Chancellor last September to support individuals facing hardship and unable to pay the tax in full, so another good reason why people should file on time.