Stiff new late filing penalties

HMRC have released more information surrounding the new penalty scheme for late delivery of self assessment tax returns for 2010/11. They have been keeping this relatively quiet and I am not surprised one bit.

The new penalty regime starts from April 2011 and could mean a late tax return filed 6 months late might attract a penalty of at least £1,300 even if no tax is due. This is a million miles away from the current penalty scheme where £100 penalties are accrued every 6 months and usually no penalty is issued if no tax is due.

Here’s a quick run down on the new scheme…..

1 day late…..A £100 penalty is initially charged even if there is no tax to pay or you have already paid all outstanding tax

3 months late…..charged an automatic penalty of £10 per day, up to a maximum of £900.

6 months late…..charged further penalties which are the greater of 5% of tax due or £300

12 months late…..charged yet more penalties, which are the greater of 5% of tax due or £300 with serious offenders facing a penalty of up to 100% tax due

HMRC argues that this will only affect a small minority of people whose returns are delivered late but, HMRC say, cause increases in resources needed to pursue and deal with them.  HMRC’s Stephen Banyard added…“The old £100 penalty was not much of a deterrent and these new penalties, which increase over time, will get people to submit returns as soon as possible. Basically the greater the delay, the greater the penalty”

This is all well and good and HMRC are correct in saying the majority of tax payers will not be affected. However, it’s whether any leniency will be applied by over zealous tax collectors when clearly there will be circumstances where returns will not be filed for a host of reasonable explanations.

Thankfully, no penalties will be applied until February 2012 so we do have a few more months to see how this pans out…..


Posted by Chris Mollan