Self Assessment Penalties Explained


As we have passed 31st January and therefore the Self Assessment deadline, HMRC has confirmed that 93.68% of all Self Assessment returns were submitted before the deadline. For our part we are very grateful to all clients who sent us their information early.
With time to now reflect on the Self Assessment process, we thought it might be useful to set out the penalties which HMRC administer for Self Assessment late returns and late payments. Based on recent years, HMRC will issue at least one million late filing penalties. There are two types of penalties:
• Late filing penalties
• Late payment penalties
There is an immediate £100 penalty for any late filings. This applies even if there is no tax to pay, and whether or not the tax has been paid by the due date. There is then a daily penalty of £10 per day for returns that are more than three months late. If the return is still outstanding six months after the filing date, there is a further penalty of 5% of tax due for the return period or £300, whichever is the greater. Should the return be outstanding 12 months after the filing date, a further penalty of 5% of tax due for the return period or £300, whichever is the greater. Finally there are higher penalties of 70% of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (increasing to a 100% penalty if there is deliberate concealment).
Late payment penalties are as follows:
• penalties of 5% of the amount of tax unpaid 30 days after the payment due date
• further penalties of 5% of any amounts of tax still unpaid at six months
• further penalties of 5% of any amounts of tax still unpaid at 12 months

HMRC can suspend late payment penalties where the taxpayer agrees a Time to Pay arrangement and the tax is paid over a period of time.
Penalties can be avoided if the taxpayer has a ‘reasonable excuse’. For example, if the taxpayer was suffering a serious illness which prevented him managing his affairs. There are several other situations that HMRC may consider as a reasonable excuse:
• Where the deadline was not met because the taxpayer did not receive the return
• Where the return was posted in good time but an unforeseen event disrupted the postal service
• Where the taxpayer or agent lost his records as a result of fire, flood or theft
• A close relative or domestic partner died shortly before the deadline
• A close relative or domestic partner had a serious illness shortly before the deadline
• Where the taxpayer is in prison.
However, HMRC is stringent on what constitutes a “reasonable excuse”. Such excuses do not include:
• The return is too difficult to complete
• Pressure of work
• Lack of information to complete
• Absence of reminders from HMRC
• Failure by your accountant to submit
• Or that the dog ate it!

There are circumstances where the penalty can be appealed. Should you receive a penalty from HMRC, and you believe that it is not justified please contact Jackie or Andrew.

Castletons Accountants

Leave a comment