Here we breakdown what happens if a taxpayer misses the crucial 31 January deadline and the process for removing the £1,600 late filing penalty.

Deadlines

The standard deadline for submitting a tax return to HMRC is 31 January following the tax year, so for the 2022-2023 tax year, the deadline is 31 January 2024. This deadline only applies to submissions made electronically. Paper submissions have an earlier deadline, in the October following the tax year. Where a taxpayer is new to submitting tax returns, the deadline for filing will be 3 months after the tax return is issued (if this is later than 31 January).

There is not a process to apply for an extension to the deadline, although it is possible to submit a tax return to meet the deadline and then amend it at a later date with new information.

Penalties - Overview

HMRC will start late filing penalties off at £1,600 over the first year. In theory, some of these penalties are discretionary (HMRC do not have to levy a full penalty) but in practice they do levy the full penalty whenever possible.

Penalties - Breakdown

Late filing penalties are actually made up of 4 different types of penalty. Each type being levied at different times.

• Initial Penalty: £100

• Daily Penalty: £10 a day for 90 days

• 6 Month Penalty: £300 or 5% of tax due (whichever is greater)

• 12 Month Penalty: £300 or 5% of tax due (whichever is greater) (again!)

The 12 month penalty can also be increased if HMRC determine that the taxpayer is withholding relevant information.

Investigation Risk

A tax return submitted late may pose a greater threat of enquiry. For obvious reasons, HMRC do not make public the criteria on which they select which taxpayers to select for enquiry. It is known that HMRC closely monitor compliance with filing deadlines and persistent late submissions could flag an individual for additional checks. Someone who consistently submits late tax returns will be especially at risk of this.

Collection Process

If penalties remain unpaid, HMRC will eventually attempt to collect them using external agencies. This will begin with letters and phone calls, but will escalate to legal action. It is possible to set up payment plans (called “Time To Pay Arrangements”) to spread the cost over time.
   

Right To Appeal

Taxpayers have a right to appeal against penalties which are levied against them. To do this, they need a reasonable excuse (i.e. severe illness or bereavement). A potential trap in appealing against HMRC penalties is that the excuse must be valid for the entire period until the appeal is submitted. If a taxpayer receives a penalty and waits a few months before appealing it, the appeal will be rejected unless there was a reason the appeal could not have been submitted within 30 days. This applies even if the excuse for not being able to submit the tax return on time was completely valid. 

Unfortunately, these appeals often take months to be dealt with by HMRC. Those taxpayers who are due a tax repayment can expect to face significant delays in receiving their repayment and those taxpayers who are due to pay tax will have to watch interest accumulate on their penalties over the months HMRC take to review their case. When possible, it is always best to get your tax return submitted on time.

FAQs

Q: If I’m due a repayment can I still be fined?

A: Yes. Even though it may seem contradictory, taxpayers who are actually owed money by HMRC will receive late filing penalties just the same as everyone else despite the fact that HMRC lost out on nothing as a result of the late submission.

Q: Will these penalties be wiped out if I submit my late returns now?

A: No. It used to be HMRC practice to wipe out penalties for certain tax payers as soon as the outstanding tax returns were filed. This changed many years ago and HMRC now continue to pursue taxpayers for late filing penalties well after the tax returns in question have been submitted.

Q: I’ve paid my penalty already, can I still appeal?

A: Yes, you can appeal against penalties you have already paid. Although, you will need to explain why you were not able to appeal at an earlier date.

Q: How long will an appeal take to be dealt with?

A: This varies greatly. In our experience, appeals typically take a few months to be received, read, processed and responded to. As of today (Wednesday 17 January 2024), HMRC are only just starting to look at appeals submitted on 14 November 2023. More complex appeals may be further delayed as are passed up the chain within HMRC.

Q: Are there more types of penalties?

Yes, penalties can be levied for late payment of tax, inaccuracies on a tax return and late notification of chargeability of income tax (telling HMRC you have tax to pay). Each of these penalties are dealt with individually, but there are protections in place to ensure that multiple penalties are not issued for the same error.

Q: Can you appeal on my behalf?

A: Yes. We have submitted many successful appeals to HMRC and we understand the process. To have our team of experts review your case and prepare an appeal to HMRC, request a call.