Should HMRC Defer Self-Assessment Tax Returns?
Over the past month as the self-assessment tax return deadline of 31st January loomed, HMRC has faced a growing chorus of calls to relax the requirement to submit returns by that date.
As a result of the disruption caused by the Covid pandemic to both taxpayers and their accountants, government bodies have been gracious in many areas. Companies House applied an automatic three-month deferral to all companies – giving them twelve months in which to file their accounts instead of the usual nine. HMRC deferred the payment of VAT and have encouraged those with difficulties to apply to spread the payment of corporation tax.
Self-assessment tax returns for the tax year ended 5 April 2020 are due for submission with HMRC with automatic penalties starting at £100 for those who miss the deadline. With the onset of lockdown 2, HMRC had been urged defer this deadline as well. HMRC had rejected these calls and insisted that returns still be submitted on time explaining that taxpayers who were experiencing financial difficulties should get in touch with them to agree a payment plan.
According to the Sunday Times (10/01/21) a simplified Covid excuse form is being developed which will allow the self-employed and landlords to request that HMRC cancel any penalty – and that ‘HMRC is planning a very lenient attitude’.
Whilst very welcome news, this is not quite the U-turn some had hoped for. HMRC already have a process in place whereby those with a reasonable excuse can ask for penalties to be waived and this seems to just be clarifying and simplifying the ability to claim a Covid related excuse. HMRC have not however deferred the deadline and still expect returns to be filed by the 31st January.
In my view, HMRC have struck the right balance. I had to have my MOT done last week, the expiry date was not extended, and this meant going out during lockdown to my local garage. Collating information for tax returns can be done without leaving the house. In as much as the new lockdown presents difficulties for those filing returns, many need not have waited until the 11th hour to start preparing their returns.
For the many business owners facing genuine difficulties, I believe is not necessary to defer the deadline as the Covid related excuse claim should be sufficient. My advice is that until HMRC have clarified otherwise, assume that the returns are due by the 31st. For those to who circumstances do not allow them to file on time, I would suggest that they keep records of the difficulties and any supporting evidence so that they can appeal any penalties.
What help is available? HMRC have said that on account payments which were due in July can still be deferred and as long as they are settled by 31st January they will not charge interest or levy penalties. Late payment penalties are usually charged where tax remains unpaid after 30 days. HMRC have advised that if a time to pay arrangement is agreed, they will only charge interest on the unpaid amounts.
As a final note, I would point out that those who are claiming or intend to claim SEISS grants, a tax return for 2019/20 will need to be filed to determine eligibility and this should also be done as soon as possible.
If you would like to discuss any aspect of this article or for any other tax, business or accounting advice, please email Yedidya Zaiden at yedidya.zaiden@raffingers.co.uk or click here to get in touch.