I warned in previous articles that the new penalties for late 2010/11 Tax Returns were eye-watering in their ferocity.
This week the first of the nasty penalty notices have started arriving. I have seen a few for clients who failed to bring us their papers for the year and failed to provide us with estimates to use. They were each charged £1,200 in penalties. This is on top of the £100 there were charged back in February for missing the 31 January 2012 deadline.
The problem with the new penalty regime is that the penalty stands even if – when you finally submit a Return – you owe little or no tax. In the past if you owed say £15 tax then the most you would face in penalties was 2 x £15.
The way the latest £1,200 penalties are made up is as follows:
£300 for being 6 months late (i.e. still not sent return by 31 July 2012, plus £900 being a daily penalty of £10 for a maximum of 90 days.
HMRC still needs to get the Return, and as I said above, then penalty will stand.
There are only two reasons why HMRC may make the penalty go away:
- You should never have been sent the return in the first place, or
- You convince them you have a reasonable excuse for not sending in the return on time.
To succeed under the first heading you need to check HMRC’s criteria for issuing Self Assessment Returns. (They are issued to people who are directors of companies, self-employed and landlords, plus some pensioners.)
Succeeding under the reasonable excuse heading could be a bit of a battle. You see you need to show that you not only ad a reasonable excuse for missing the 31 January 2012 deadline but also one that prevented you getting your act together between then and 31 July 2012. You are likely going to be relying on a serious illness of you or a family member and / or a bereavement or two.
Oh – and by the way – ignore the matter to 31 October 2012 and HMRC will slap on another £300 for good measure, more if you owe a lot of tax!
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.