Overdue Tax Return

The Negative Implications on Your Finances

Filing of tax return for the tax year 2013-2014 was due last 31 January 2015. But some 890,000 people still missed the cut off and is now facing an instant fine of £100. This means, HMRC has already earned £89 million.

Depending on whether or not late tax returns will be settled, it is possible that HMRC would earn more.

According to Anita Montieth, tax manager at the Institute of Chartered Accountants in England and Wales, “Any late comers after 30 April could face additional fines of ten pounds a day. It quickly adds up. The additional fines could reach £900 leaving people with a total bill of £1000 by the end of July”.

More fines will also be levied for subsequent missed deadlines. The overall fine of £1000 is only applicable if a tax return is 3 months late. If a taxpayer continues to evade his liabilities, additional fines will be made.

  • For a tax return that is 6 months late a fine of either £300 or 5% of the tax due (whichever is higher) will be added on top of the three-month penalty already imposed.
  • For a tax return that is 12 months late, another fine of £300 or 5% of the tax due, whichever is higher, will be added on top of whatever penalties already made.

In the end, whatever amount of tax a taxpayer owes could be doubled. In serious cases, 100% of the tax due will be collected as well as any other tax a taxpayer owes.

The amount owed also differs between online and paper return. Since the deadline of the latter was 31 October 2014, the number of days to be counted is longer than an online return that is due 31 January 2015. There are also additional penalties if there are mistakes in a tax return.

Being careless will cost a taxpayer a penalty of between 0% and 30% of the extra tax owing. If a tax is underestimated deliberately, the penalty will range between 20% and 70%. If this is done with an attempt to conceal the fact, the penalty will be even higher, between 30% and 100% to be precise.

Of course, if a taxpayer has a ‘reasonable excuse’ for filing a late tax return, penalties may be waived. But evidence must be provided to support the excuse given.

What are reasonable excuse where an entire penalty may be cancelled?

  • A taxpayer was confined in a hospital preventing him from dealing with his tax affairs
  • A fire prevented a taxpayer from completing a tax return
  • Paper return did not reach HMRC on time due to postal delays
  • Computer or software failure before or while online return is being prepared

The list is not exhaustive, but the excuses seem something anyone can get away with. Unfortunately, HMRC or the Tribunal will look hard into the circumstances. A ‘reasonable excuse’ may be accepted for one penalty charge but not all. If your accountant is proven unreliable, a ‘reasonable excuse’ is not applicable.

A piece of good news for latecomers: HMRC may scrap the £100 fine under radical government plans. The current penalties are considered to be too rigid, which is why the agency is drawing up a proposal to lay it easy on taxpayers who missed the deadline “by a day or two”. This doesn’t give taxpayer a reason to be late, however.


Photo by Isaac Smith on Unsplash

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