Late Filing Penalties

Late Filing Penalties

What if you are late filing your return or paying your tax?

It is recommend that you file your return on time and pay the tax by the due dates. Failure to do this not only increases your risk of being picked by HMRC for an enquiry but can involve you being liable for the penalties and interest shown below.

2010/11 onwards
There is an automatic non-refundable penalty of £100 if the return is not filed by the due date (usually 31st January following the end of the tax year). If there is a reasonable excuse, the penalties will be waived. Reasonable excuse does not include ignorance, negligence or someone else not preparing accounts or filing the return on time on your behalf.

If the return is more than three months overdue, there is a penalty of £10 for each further day that the return is late up to a maximum of 90 days.

If the return is more than six months late there will be a further penalty of £300 or 5% of the liability if this is higher.

If the return is filed more than twelve months after the filing deadline (i.e. 31st January 22 months after the end of the tax year) there will be a further penalty of £300 or 5% of the liability if this is higher in addition to the penalty due for the previous 31st July. In serious cases, the penalty may be up to 100% of the tax due.

If you do not pay on time, interest runs on any amount paid late. There is also a 5% surcharge if the liability for the previous tax year is not paid by 30 days after 31st January following that tax year and a further 5% surcharge if it is not paid by the 31st July after that. If the tax is not paid by the following 31st January then there will be a third 5% surcharge.

The penalties have increased significantly since 2009/10 and it is vital that all taxpayers ensure that their returns are filed on time.

Example 1: Fred is lazy and has not filed his tax return. He knows that he will be due a small repayment and he, therefore, thinks that there will be no penalties. His assumption is correct for 2009/10 but for 2010/11, he will have potential penalties of up to £1,600 if he does not file the return until after 31st January 2013.

Example 2: Jonathan is facing cash flow problems so he delays filing his tax return because he knows that his liability for 2010/11 is £3,000. Assuming that he is more than 12 months late, the penalties and surcharges (ignoring any interest) for 2009/10 would be £500 but for 2010/11 this will potentially increase to £2,050 assuming that HMRC does not consider the case to be serious.

What you do if you cannot pay?
Try to make an arrangement with HMRC. There is currently a Business Payment Support Service Helpline Tel No: 0300 200 3835.

© Thandi Nicholls Ltd 2011 All Rights Reserved - The above article is provided for guidance only and may not cover your personal circumstances so you should not rely on it. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a  nor K Nicholls FCA or S Thandi can be held responsible for the consequences of any action or the consequences of deciding not to act.

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