Tax: Late tax returns - beware those scary revenue powers
Published 03/09/2007 | 14:22
About 10% of people miss the annual tax return deadline of January 31 and leave themselves open to a penalty. This is a flat £100.
Some people think that's a low amount and probably worth it to save the hassle of filling the form.
Sadly for them paying the fine is not an end to the matter.
Today's article is about what happens once you miss a tax return deadline.
The next deadline is September 30 this year, which is for people who want the Revenue to calculate the tax bill.
You should adhere to this if you want certainty that the Revenue will tell you how much tax to pay in time for January 31, 2008 and also if you want a tax bill (of under £2,000) collected from your tax code at work.
Unless either of the above applies then September 30 is not a very scary deadline. For example, there is no £100 fine.
Having said that, I would encourage most people to send in their forms as soon as they can. However, if you miss September and run into October it's no big deal.
What then of people who missed the last big deadline of January 31 (for tax returns for 2005/06)?
Well, by now they will have received a penalty of £100 ? probably in February 2007. If the return has still not been submitted then a second £100 penalty will follow around now.
As I have previously said, these penalties should not be seen as alternatives to sending in your form. The Revenue will still wait for it and various things will happen if you don't send it back completed:
- chasing for payments;
- raising estimated bills;
- sending further annual returns;
- charging daily penalties for the late returns.
The first thing you will notice is that the Revenue will chase you for payment of the penalties. And it will add interest if you pay them late.
Once your return is submitted then should the tax bill be less than £100 the penalty is reduced to the same amount. Otherwise the full £100 would still be levied.
Secondly, the Revenue may raise a tax bill in the absence of your form.
This is called a determination. It may bear no resemblance to your true tax liability. It is merely a forcing measure used by the Revenue.
Note that the tax so charged is payable whether you like it or not. Only submission of the form can change it ? downwards or upwards. Until the form goes in the Revenue can pursue you even to bankruptcy on the basis of a tax determination.
Thirdly, I mention the curious issue of HMRC sending you further tax returns.
I say this because every year the taxman is trying to reduce the number of people who are sent tax returns.
The taxman examines your return and may decide not to send one next year. If the Revenue does this then it writes and says so.
The problem with not filing a tax return is that the taxman gets no opportunity to take you off the system. Therefore you may end up being sent tax returns for longer than would have been the case had you co-operated.
Finally, for the serious cases, there is the scary issue of daily penalties.
This is an option reserved by the Revenue and normally used where more than one year's return is late.
The Revenue will write and give you warning that it is considering charging daily penalties.
To do this it must seek permission from a panel of independent general commissioners. You cannot attend that hearing. Once permission is given you could face a penalty of up to £60 per day, per tax return.
So once those kick in then, assuming you owe HMRC two returns, each further week's delay could cost you £840 (2 x £60 x 7 days).
These daily penalties are really nasty in that once imposed they will not go away.
Therefore, should you submit your tax returns and owe no tax the daily penalties remain payable in full.
Adrian Huston, a former tax inspector, is now a partner in Belfast tax and accountancy firm Huston & Co LLP (www.hustontax.co.uk; 028 9080 6080).