I run a small family construction business and I plan to leave my books and records in with my accountant early in the New Year to allow him to prepare my accounts and tax returns. As I operate a partnership with my 3 brothers, there will be 1 partnership return required and 4 individual returns. What are the penalties if these returns are not filed on time?
HM Revenue & Customs (HMRC) estimates around 11 million people will be required to submit a return for the tax year 6th April 2015 to 5th April 2016. If they’re still outstanding, these tax returns need to be filed electronically by 31st January 2017 to avoid an automatic filing penalty being issued. Therefore, the sooner you complete your tax return, the less stressful your New Year will be. Forward planning will also reduce the risk of making any costly mistakes or having to make corrections to your tax return at a later date.
HMRC received over 10 million completed Self-Assessment tax returns ahead of last year’s 31st January 2016 deadline – more than 92% of the total returns expected, and 150,000 more than the year before. More than 89% of returns (9million) were filed online, continuing the growing trend to deal with the tax authority electronically.
The busiest day for the last tax year was 29th January 2016, with almost 515,000 returns completed – more than 21,000 returns received per hour. The busiest time was between 2pm and 3pm, with 50,358 returns being submitted– 14 per second.
It’s wise, therefore, not to leave your return until the last day, as HMRC’s website will be at its busiest. And if a busy website and being at the back of a phone queue aren’t incentives enough, remember that filing your returns late will force you to dig deep into your pockets.
A late tax return is currently subject to the following penalty regime:
- An initial £100 penalty, which will apply even if there is less than £100 tax to pay or the tax due is paid on time
- 3 months: Additional daily penalties of £10 per day – up to a maximum of £900
- 6 months: A further penalty of 5% of the tax due or £300 – whichever is greater
- 12 months: Another 5% of the tax due or £300 – whichever is greater
- In the most severe cases, the penalty after 12 months can be up to 100% of the tax due
These penalties are in addition to one another, so a self-assessment tax return filed a year late would face penalties of at least £1,600 – or even more, depending on the level of tax due.
There are also additional penalties for late registration with HMRC and late payment of tax, with the latter also incurring interest.
The key message is therefore to gather all your financial information together as quickly as possible to allow your accountant the necessary time to complete all your returns and file them well in advance of the 31st January deadline.
The advice above is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.