Belfast Telegraph

Sunday 26 October 2014

Tax Return penalties £10 per day from 1 February 2012

Stop press – HMRC staff’s industrial action will do nothing to save money for people filing a paper Tax Return on 1 or 2 February 2012 .

The strike could cost those folk an extra £10 or £20 due to new daily penalties which start clocking up from 1 February 2012. Read on.

Just to set the scene, if you wanted to file your Self Assessment Return on paper for 2010/11 you had to do so by 31 October 2011. Now that deadline has passed there are two options:

  • File online – yourself or using a tax adviser who has his own special codes
  • File on paper and take the consequences.

If you choose to file online then HMRC’s strike at the contact centres on 31 January 2012 means that your return can be filed up to midnight on Thursday 2 February 2012 without incurring a £100 penalty.

Downside of this is that special codes are needed to file online. If you only apply for them today by the time they are posted out to you it will be well past 2 February. If you can find a generous firm like ours, you may be able to get a tax adviser to file your figures for you, by the deadline – as they have their own codes.

For the first time this year we have found ourselves being asked – by people who aren’t clients – simply to file their figures for them. They are too late to get the codes and don’t want to pay HMRC any more than necessary.

So what’s this about daily penalties?

The new penalty system which started with the 2010/11 Returns means that a return filed late gets a £100 penalty, which, unlike previous years, will NOT be reduced if you owe very little tax.

More concerning, though, are the daily penalties. These are £10 per day, and also will not be reduced, even if you owe no tax.

The daily penalties start running once your tax return is 3 months late.

If you file a paper return that means from 1 February 2012 you are racking up £10 per day you delay. File a paper return on 15 February and you will owe HMRC penalties of £250 – the flat £100 for missing the 31 October date, then 15 days at £10 per day.

If you choose to file an online return, then only if it is filed after 30 April 2012 then the £10 per day penalties will start off. Filing online requires you to:

  • Have the special online codes which get posted to you, or
  • Find a nice, friendly tax adviser who will file your numbers for you.

Let’s assume today you are deciding whether to file on paper (as you don’t have the online codes) or online after the codes are issued by post. Which is better?

1. Answer: If you can file on paper today, then the penalty will be £100. Filing online in a few days time will still be a late return, and will attract a penalty which is also £100 – so no difference.

2. Alternate answer: If you need another 5 days to pull your numbers together, then go for the online filing option. Paper would mean fines of £100 plus 5 days at £10. Online will only mean £100.

3. The third way? See if a nice friendly tax adviser will file your numbers for you online – so instead of paying HMRC penalties, you pay them a modest filing fee instead.

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.

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