Gabelle Tax Analysis: £10 daily penalty regime starts 1 May 2012 for late Self-assessment returns

HMRC warned advisors on 19 April that they intends to start charging daily penalties from 1 May 2012 where they identifies that a tax return should have been submitted for the 2010/11 tax year (i.e. by 31 January 2012) or that tax has not been paid when due.

The new penalty regime allows HMRC to charge:

  • An initial penalty of £100;
  • After three months it can charge daily penalties of £10 per day for up to 90 days;
  • After six months either a penalty of 5% of the tax due or £300, whatever is the greater; and
  • After twelve months, either a further 5% of the tax due or £300-, whichever is the greater.

HMRC can also charge a further penalty of 5% of the tax paid late at 30 days, 6 months and 12 months, over and above the penalties for late filing.

To pre-empt the new late filing penalties, advisers with clients who have been notified that tax returns are due but who disagree should notify HMRC straightaway on 0845 900 0444. If HMRC agree, they will cancel any penalty notice and confirm that the return is not needed.

The new late filing penalties are designed to discourage poor compliance and remove any possible financial advantage from delaying the payment of tax. Advisers with clients who continually fail to comply should warn them that they face not only late filing penalties but also penalties for late payment.

It is essential that clients affected by these developments take steps now to ensure the 2010/11 return is submitted as quickly as possible and that going forward they submit their future returns on time.

John Hood is a Director at Gabelle LLP. He can be contacted at john.hood@gabelletax.com or via TaxDesk on 0845 4900 509.