Self Assessment interest and penalties?

Self Assessment interest and penalties?

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Can someone guide me as to what/whether interest and penalties will be due in the following scenario:

Client has not received tax returns for years. HMRC issued a 2008-09 SA100 on 10th December 2010 which taxpayer receives on 20th January 2011. Tax return gives 3 months for submission. Client appoints tax adviser as soon as possible and tax return is completed and submitted online within 2 weeks and the tax paid over to HMRC.

The client's 08-09 tax return shows tax payable of £7,000 relating to excess relocation expenses. Although no tax return has been issued for 2009-10, client also submits 2009-10 tax return which shows overpayment of £2,000 (they were on a large K code).

The client is very concerned with the prospect of interest, surcharges and penalties. Can someone explain what they would be in this scenario. I understand that normally, interest on an 08-09 return would run from 31st January 2010 but in this case would it run from the "new" due date of 3 months after the return was issued (i.e. 10th March)? 2008-09 surcharges would normally arise in February and July 2010, but in this scenario would the date be different given that the tax return was issued late? Could they suffer penalties eg for not notifying HMRC of relocation expenses or for some other reason?

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By petersaxton
15th Feb 2011 17:14

Interest runs from 31 January

I don't see why interest should run from 3 months after when the tax return is issued. I thought the 3 months only referred to penalties. Why was the tax return issued late? Was it because the tax payer gave new income information late?

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By preeti
15th Feb 2011 17:42

no explanation for late issued tax return

There is no explanation as to why the tax return was issued so late by HMRC, the large underpayment related to relocation expenses which would have been on the 2008-09 P11D which HMRC would have had a long time ago but failed to act on until now...would ESCA19 apply even though the client has sent the tax return and paid the underpayment (as he was very stressed he wanted to send the tax asap)?

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By petersaxton
15th Feb 2011 20:57

Yes

I think it would and it's certainly within the time limits.

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