Deadlines and Penalties

Help with your Tax Return guide

3

If you receive a Tax Return, you are legally obliged to complete it, even if you think it is not relevant to you. If you do not submit a completed Tax Return, you will be fined and HMRC may issue an estimated tax bill (called a ‘determination’). This bill will stand until you send in the completed Tax Return – and you have only three years from the 31 January filing date to replace the estimated bill. For years where the bill has not been estimated you have four years from the end of the tax year  in which to submit the return.

Asking HMRC to withdraw a return

If you consider that you do not need to submit a tax return, for example because all your income is taxed under PAYE, you can phone HMRC on 0300 200 3310 and ask for the tax return to be withdrawn. If HMRC agrees, this will means that you no longer have to file a return and any penalties issued for missing the tax return filing deadline will be set aside.

There is now a two year time-limit from the end of the tax year in which to ask HMRC to withdraw a tax return.

Completing and filing a return

Your Tax Return must normally be filed (completed and submitted to HM Revenue and Customs) by 31 October following the tax year end (5 April) if you file on paper, or by 31 January following the tax year end if you file on-line. So the 2014 Tax Return (for the tax year 2013-2014) is due on 31st October 2014, if filed by paper, or 31st January 2015, if filed on-line. You will be sent your Tax Return around about May after the end of the tax year.

If you register under the self-assessment system later on in the year, and so cannot be expected to submit your Tax Return by the same date as everyone else, the deadline is extended to 3 months from the date of issue of the return, and the revised due date will be shown on the Tax Return you have been sent.

What happens if my tax return is late?

Penalties:

There are penalties for late payment of tax, late filing of tax returns and late notification of liability to pay tax.

Penalties for late filing

  1. You will be charged a penalty, even if you do not owe any tax.
  2. If you miss the filing dates of  31 October  following the end of the tax year (for paper returns) or 31 January next following (for on-line submission), you will be charges a penalty of £100 (this will not be refunded, even if no tax is owing). Eg tax returns for the year to 5 April 2014, should be filed on paper by 31 October 2014, or on-line by 31 January 2015
  3. If you are three months late, you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
  4. If you  are six months late there will be a penalty of £300 (or 5% of the tax owing if this is greater)
  5. If you are 12 months late, you will be charged another £300 (or 5% of the tax owing if this is greater). In exceptional circumstances a higher penalty of up to 100% of the tax due is possible

Penalties for late payment

  1. 5% of tax unpaid after 30 days
  2. Another 5% of tax unpaid after 6 months
  3. Another 5% of tax unpaid after 12 months

There is more information about this on the HMRC website at www.hmrc.gov.uk/sa/deadlines-penalties.htm

If you are in a partnership the penalties apply both to the late submission of the partnership return and to the individual partners’ returns. Late filing penalties apply to the partnership return, even if no tax is due.

Penalties for failing to notify liability to pay tax

If you have a new source of income on which there is a tax liability, you should notfiy HMRC by 5 October following the end of the the tax year in which the income arose.

Eg. Maggie inherits a house and first rents it out in June 2013. This is in the tax year to 5 April 2014. So Maggie must tell HMRC about the rental income by 5 October 2014 at the latest.

If HMRC is not notified in time ‘failure to notify’ penalties can apply. These are based on the tax due and unpaid at ‘due date’ – normally the 31 January following the end of the tax year. The size of these penalties depends on taxpayer behaviour.

There is a summary, and examples of how this works in compliance factsheet CC-FS11 ‘Late notification penalties’ which can be downloaded from http://www.hmrc.gov.uk/compliance/factsheets.htm.

Appealing against a penalty

If there are exceptional circumstances which explain why you missed the tax return filing deadline, you can appeal against the penalty.  For information about appealing against penalties, click here: http://www.hmrc.gov.uk/sa/deadlines-penalties.htm#3

Interest:

If you pay your tax late you will be charged interest. If your tax is due on 31 January and is not paid on time, interest will run from 1 February. You will also be charged interest on late payments on account (which are due on 31 January and 31 July). For more information on interest and payments on account, see our self assessment – paying tax page.

Tip from TaxAid If your tax return will be late, but you have a good idea what the tax will be, make that payment by the due date. If your estimate is right and all tax has been paid on time, this will reduce the late payment penalties (but will not avoid late filing penalties). If you have a good reason for missing the deadline, such as an emergency trip to hospital or a bereavement, then you should tell HMRC. In our experience, people who have a genuine excuse may win their appeal without the need for a hearing, as HM Revenue and Customs may agree with you or back down if you show a determination to go to the Tax Tribunal.

Tip from TaxAid You can protect your position if you routinely keep copies of forms and correspondence sent to HMRC, and keep ‘proof of posting’. If extraordinary circumstances prevent you meeting deadlines, keep any evidence you can and make sure HMRC know as soon as possible.

What if I have many years worth of tax returns to complete?

If you are worried because you have a lot of outstanding Tax Returns and don’t know how to start completing them, we recommend that you read the “how to complete tax returns” section of this guide (http://taxaid.org.uk/guides/tax-returns/need-help-completing-your-tax-return) and, if you are still having difficulties, then call the TaxAid helpline with your questions.

You may only submit three years worth of late tax returns. For example, in the tax year 2014-15 (ie from 6 April 2014 to 5 April 2015) you may submit returns for 2013/14, and three late returns – 2010/11, 2011/12 and 2012/13.

If  HRMC has raised estimated tax bills (called ‘determinations’), then you have only 3 years from the 31 January filing date within which to send in a return ( see http://www.hmrc.gov.uk/manuals/chmanual/CH56100.htm ).

Once this deadline has passed, your only recourse is ‘Special Relief’. This is a statutory solution which replaces the previous concession known as Equitable Liability. Special Relief may be difficult to obtain unless there are exceptional reasons why you have missed the tax return deadlines and you have good evidence of your income.

If you think you may need to apply for Special Relief, you should contact TaxAid (http://taxaid.org.uk/pages/taxaid-helpline). The is more information about Special Relief on the TaxAid website in the tax debt guide – see the end of the page on bankruptcy at  http://taxaid.org.uk/guides/tax-debt/bankruptcy. There is technical guidance on the HMRC website at http://www.hmrc.gov.uk/manuals/sacmanual/sacm12215.htm.

What happens if I don’t send in my Tax Return?

If you are sent a tax return, you are legally obliged to fill it in and send it back, even if you don’t owe any tax (even if you have not earned any money for the year in question). The only exception is if you can persuade HMRC to withdraw the tax return (see above).

If you don’t sent the return back you will be charged penalties and might be sent an estimated tax bill (called a determination). Once a determination has been made HM Revenue and Customs is entitled to the tax due as set out on that determination and  can collect it through the courts – even to bankruptcy. The only way to cancel the debt is to send in a tax return to establish the correct amount of tax due.

If you are worried about what will happen because you are having difficulty paying your tax, please see our Problems Paying your Tax? guide.

If you need help completing your tax return and your income is too high to qualify for help from TaxAid, please see ‘other sources of advice’ on the tax debt, sources of information page at

http://taxaid.org.uk/guides/tax-debt/sources-of-information-and-advice

Being out of time – impact on claims and elections

There are many tax claims and elections – and all have time limits. They cover such issues as claiming Blind Person’s Allowance – a higher amount of tax free pay -  to making loss relief claims. In general, the default time limit for such claims is 4 years from the end of the tax year; but some claims and elections,  in particular some loss relief claims, are on a shorter time scale. This means that being in arrears with your tax returns could mean that you potentially miss making a valuable claim or election.

There is technical guidance on claims and election time limits on the HMRC website at http://www.hmrc.gov.uk/manuals/sacmanual/SACM3035.htm

See also – Penalties for errors and mistakes on returns

You may be charges penalties if there are errors on your return. See ‘Penalties for errors and mistakes on returns’ in the section ‘Problems with the returns you have submitted’ at  http://taxaid.org.uk/guides/tax-returns/enquiries-and-other-problems-with-the-returns-you-have-submitted