If you don’t get your tax return in on time and pay the money that is owed, it could cost you nearly half as much again – say London Chartered Accountants Blick Rothenberg LLP.
“The Revenue have this year decided to issue the top ten excuses that people have come up with for not getting their return in on time,” said Senior Tax manager, Nimesh Shah, “These included the death of a pet goldfish, the distraction of a volcanic eruption and an accountant proclaiming he was too busy to file his own return as he was too busy filing his clients’ returns.”
He added: “The fact is that many people don’t realize how quickly they can rack up penalties and interest if they don’t file their tax return on time and make the necessary tax payments.”
“If you don’t file your tax return by 31 January, HMRC will issue an automatic fixed penalty of £100. If the tax return is three months late, HMRC will start charging daily penalties of £10 per day, and these run for a period of up to 90 days, so up to £900 in total.
“After 6 months, HMRC will charge a penalty of 5% of the person’s tax or £300 – whichever is higher. Therefore, within 6 months, you could be facing total penalties of at least £1,300. The penalties start to become even more serious if your tax return is more than 12 months late and can be as much as 200% of the tax. HMRC will charge these penalties even if you don’t actually have any tax to pay.”
Nimesh added: “In addition, if you don’t pay your tax on time, HMRC will charge daily interest at 3% (which is relatively quite high compared to bank interest rates). Furthermore, if you don’t pay the tax by 2 March, HMRC will charge a penalty of 5% of the tax and further 5% penalties are levied if the tax is unpaid at 6 months and 12 months.
“If someone doesn’t file their tax return until 1 June and they calculate that they have £1,000 of tax to pay, they could be facing an additional bill of penalties of interest of just less than £500, which is nearly as half as much of the tax owed in the first place.”
Nimesh Shah said that HMRC would always allow for legitimate occasions where a person cannot file their tax return on time. If a taxpayer has a ‘reasonable excuse’ HMRC can, at their discretion, accept the late filing of a tax return.
He added: “Reasonable excuse’ is not specifically defined in law and a HMRC officer would look at each case on its own facts. In our experience, it is rare HMRC will extend the deadline, but a sensible example may include serious illness or family bereavement.
“Whilst filing a tax return isn’t at the top of everyone’s New Year agenda, the costs of not getting it in on time can leave a significant bill.”
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