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HMRC imposes new penalties for late tax returns

One million face fines that could total £950m

HMRC has sent penalties to over one million people who missed this year’s end of January deadline for online self-assessment tax returns. Estimates suggest their fines could total £950m, while new rules will bring in additional penalties for those who fail to respond.   

Tax return deadline missed

For the 77% who submit their return online, the deadline for filing 2011 tax returns was 31 January 2012. The deadline for paper returns was 31 October 2011. 

For both categories, missing the deadline can result in a fine from HMRC and according to the law firm Pinsent Masons, over one million people have already been sent penalty notices. 

New penalties for late returns  

Miss the tax return deadline by a single day and you face a fine of £100. Submitting a paper return later than 31 October counts as being late, even though you could have gained an extra three months by filing online.

The £100 fine is a fixed penalty which applies regardless of how much tax you actually owe. In previous years it was reduced if you owed less than £100 but this is no longer the case.

The longer you delay submitting your tax return, the higher the fine you incur. After three months (1 February for paper filers, 1 May for those who file online) you are fined £10 a day (in addition to the initial £100). After 6 months you face a further penalty of £300 or 5% of the tax due, whichever is higher. If you delay for a full year another £300 (or 5%) fine is imposed or you may be asked to pay 100% of the tax due. 

Avoiding a fine from HMRC 

The only way to avoid a fine if you submit a late tax return is by having a ‘reasonable excuse’. HMRC admits ‘there are no hard and fast rules’ but suggest the following are acceptable:

  • Life-threatening illness that prevents you dealing with your tax affairs
  • The death of a partner shortly before a tax return deadline
  • Unexpected or unforeseeable postal delays
  • Important documents lost, through theft, fire or flood
  • Late receipt of your online activation code, user ID or password, if you requested these before the tax return deadline   

Unacceptable excuses include:

  • Not having enough money to pay the tax due
  • Relying on another person, who failed to send your return
  • Failing to receive a reminder 
  • Late receipt of your online activation code, user ID or password, if you requested these after the tax return deadline  

Appealing against a late return penalty

If you think you have a reasonable excuse for missing the tax return deadline, you should write to HMRC as soon as possible rather than waiting for them to contact you. 

You can submit an official appeal form or simply send a letter. HMRC ask for your ten-digit Unique Taxpayer Reference (the number on the return or statement), the date you sent your return and the reason you think you have a reasonable excuse.

If you are unable to reach agreement you can ask for your case to be reviewed and if this fails you can send your appeal to an independent tribunal. Further details are available on the HMRC website.

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