HMRC’s Leniency to Taxpayers Should Not Be Trusted

HM Revenue & Customs (HMRC) is offering apparent leniency to taxpayers who may file late due to issues caused by the COVID-19 pandemic, bit don’t take their word for it says, leading tax and advisory firm Blick Rothenberg.

Nimesh Shah, CEO at the firm said: ‘I would not rely on HMRC’s show of leniency, and taxpayers should aim to file their 2019–2020 tax return by the 31st January deadline. There could be wider implications for their personal tax affairs if they don’t. The £100 late filing penalty is relatively modest, but people should think very carefully before deciding to file their tax return late.’

‘HMRC is suggesting late filers who receive the automatic £100 fine can appeal it and it will be dismissed. However, it will take time to appeal and it is never guaranteed that HMRC will accept the appeal, despite their apparent show of sympathy. In addition, HMRC will inevitably be inundated with appeals so it could be several months before the penalty is reversed.’

Nimesh added: ‘It is positive that HMRC acknowledges the immense challenges of home-schooling under the latest lockdown, and that parents will be very time-constrained in January to file their tax return. I doubt we will see much sympathy from HMRC ever again. In normal times, they would only accept situations of severe hardship as a ‘reasonable excuse’ to avoid the late filing penalty.’

‘In the past, HMRC has cited examples of ‘reasonable excuse’ as including bereavement of a close relative or serious illness which prevented you from filing your return on time. If you can find the time between work and teaching, I would encourage people to file their tax return by 31st January.’

‘You may have tax to pay by 31st January in any case, which you would only know if you complete your tax return and the calculations. HMRC will still want the tax and any late paid amounts will attract daily interest at 2.6% and a 5% surcharge if not paid by 2nd March. It is technically far more difficult to appeal these charges. I don’t think they will apply the same leniency with these charges.’

He added: ‘When a return is filed late, the HMRC enquiry window is automatically extended. For example, if a return is not filed until 1st March 2021, HMRC will have until 30th April 2022 to raise an enquiry under their standard timeline. I think there is a lot to be said for ‘good taxpayer behaviour by filing your return on time – if you have an HMRC issue in the future, they can look at your past filing and payment history and a clean record can hold some weight.’

Self-employed individuals should file their return by 31st January, as they risk being excluded from future Government support. When the Self-Employment Income Support Scheme (SEISS) was originally announced last March 2020, the eligibility was contingent on having filed the 2018–2019 tax return at the time, the Government allowed a grace period until 23rd April 2020 for unfiled 2018–2019 tax returns, but they may not be as lenient now.’

Nimesh concluded: ‘Those wanting to apply for a tax payment deferral up to £30,000 are only eligible if they do not have any outstanding tax filings this was a specific scheme announced by the Chancellor last September to support individuals facing hardship and unable to pay the tax in full so another good reason why people should file on time.’