Yorkshire chartered accountancy and business advisory firm, Hentons, is advising taxpayers to only use HMRC’s self-assessment deadline extension as a last resort, if they genuinely cannot file their tax return and pay by the 31 January, because the concession has a sting in the tail.
Earlier this month, HMRC announced it is postponing late-payment penalties for self-assessment taxpayers until 1 April in recognition of the pressure that both individuals and businesses are facing due to Covid-19.
HMRC also revealed that of the 12.2 million taxpayers who are required to submit a tax return, approximately 5.7 million still need to do so, with 6.5 million having already filed it.
The penalty waivers mean anyone who cannot file their return by the 31 January deadline will avoid a fine as long as they file online by 28 February. In addition, those who cannot pay their self-assessment tax by the 31 January will not receive a late payment penalty if they pay their tax in full or set up a ‘time to pay’ arrangement, by 1 April.
However, Simon Roberts, tax partner at Hentons, highlights that tax paid after the end of January will have interest charged on it and a late tax return will still mean a black mark on HMRC’s system. He said: “HMRC has acknowledged the difficulties that many taxpayers have faced due to Covid and repeated the concessions that they made last year.
“Nevertheless, taxpayers must be aware that the extension only applies to when the tax return is filed and not when the tax is paid. Any tax paid after 31 January will attract daily interest at 2.75% and a penalty if it’s still unpaid on 1 April.
“Plus, although taxpayers will avoid a £100 late filing penalty, the tax return will still technically be late and will be marked as such in HMRC’s software. HMRC profiles clients for risk purposes on various metrics and late submission could mean that a taxpayer is more likely to be selected for an enquiry in future or could cause other unintended consequences, like failing to meet previous penalty suspension conditions. It also means that HMRC will have a timeframe to open an enquiry into the return, which could be an unwelcome use of time.
Finally, Simon added: “We are therefore advising taxpayers to use the concession only if they really need to and take professional advice if they are unsure of how filing late might impact on their particular circumstances.”
Hentons, which has offices in Leeds, Sheffield, York, Thirsk, and London, is ranked as one of the top 100 accountancy firms by fee income in the UK by industry bible Accountancy Age. For further information visit https://www.hentons.com/