The end of January is the deadline for millions of self-employed people to file their self-assessment tax returns online for the 2014-2015 tax year.
But last year 890,000 people missed the deadline.
The penalties for failing to file your tax return on time are automatic and fixed: an initial penalty of £100.
If your return is still on your desk three months later, then a further £10 per day is charged for up to the next 90 days.
At six months the penalty rises ever further to include 5% of the underlying tax due. And it doesn’t stop there.
But what if you have good reason to file your return late? Suppose your business is recovering from a fire or you have suffered flooding.
Experts at DAS Legal Expenses Insurance and their colleagues at Croner Taxwise explain what excuses the HMRC will listen to:
HMRC has announced that tax payers affected by this year’s severe flooding will have extra time to file their returns – but only if they contact HMRC in advance of the deadline.
On its website, HMRC says that a reasonable excuse for missing the deadline is ‘normally something unexpected or outside your control that stopped you meeting a tax obligation’. Examples include the recent death of a partner, an unexpected stay in hospital, computer failures, service issues with the tax authority’s online services or a fire which prevented the completion of a tax return or postal delays
Excuses HMRC will not accept are: you relied on someone else to send your return and they didn’t; you found the HMRC online system too difficult to use, and you didn’t get a reminder from HMRC.
If you have a disability and claim to have a reasonable excuse that prevented you from meeting a deadline, HMRC will consider whether you made a reasonable effort to file on time.
HMRC will cancel a penalty for late filing in cases where the taxpayer can show that there was a reasonable excuse for failing to file on time. However that excuse needs to have prevented the taxpayer from filing a return over the whole period – in other words it must have applied continuously like a serious illness. For example, your case might be weakened if you have actually worked and received taxable income over that period. HMRC might well argue that, if you were well enough to work, you were well enough to fulfil your compliance obligations.
If you are still waiting for information to complete a return, it is entirely legitimate to make a reasonable estimate of the income or gain and then amend the return when the information becomes available. There is no penalty for amending a return, though there is a time limit for doing so.
Taxpayers have the right of appeal in respect of penalties charged and have the opportunity to argue the case in front of a tax tribunal.
According to the Office of National Statistics, last September–November there were 4.62 million self-employed people in the UK, the equivalent of 14.7 per cent of all people in employment.