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SA late filing penalties: A time for pragmatism

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Paul Aplin urges HMRC chiefs to reconsider their current position and defer self assessment late filing penalties for at least a month.  

22nd Jan 2021
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I know I am not alone in January to instinctively think in terms of the number days left in the month rather than the date. Practitioners across the land are focused on the number of tax returns still outstanding and the number of days left in which to complete them.

Countdown mode prevails, because meeting deadlines is a core part of client service even when the information has appeared at the eleventh hour. In many cases completing the tax return is also the trigger for rendering a bill. There is no reason to delay filing and every reason not to, so the conveyor belt cranks relentlessly on until the 31st. One year I filed my last return at 23:58 on the final day (and no, it wasn’t my own).

Covid-19 has presented unparalleled challenges

This year things have been made even more difficult by the Covid 19 pandemic. Clients, agents and HMRC have all faced unparalleled additional challenges. While many firms have been working remotely for the last ten months, digital accounts and tax files are new territory for some, introducing another element into an already fraught month. The latest Covid 19 restrictions further complicate the logistics. The last thing anyone involved in this process needs is more distraction.

I have therefore watched the exchange of letters between the main professional bodies (ACCA and ICAEW) and HMRC with a sinking heart. I can completely understand HMRC wanting to keep the message simple and I know that it is human nature in some situations to take every second of additional time allowed, but these are not ordinary times.

The request to extend the date from which penalties apply by one or two months is entirely sensible. Agents want the returns in quickly just as much as HMRC, but (at the time of writing) both the filing deadline and the deadline for triggering penalties remains 31 January.

Appeal process creates extra work

We have clear assurances that there will be a simplified method of dealing with appeals, that being unable to file because of Covid-19 related factors will be acceptable grounds for appeal and that agents may be able to submit appeals on behalf of multiple clients. All of those assurances are very welcome.

The penalty and appeal process will, however, still create extra work for agents (who will have to explain the situation to unhappy or distressed clients when the penalty notices arrive as well as having to make the appeals) and for HMRC (generating and sending the penalty notices, processing the appeals and then cancelling the penalties). When we are all trying to achieve the same thing, I struggle to see who gains from this.

As Rebecca Benneyworth, with characteristic common sense, said on AccountingWEB’s Any Answers Live, “The idea of doing a penalty run, sending it out and that costing taxpayers money for the postage, somebody having to handle that and do an appeal seems to me to be a massive waste of time, money and resources…HMRC would save a lot of time on both their side and our side if they would say no penalties until the end of February.”  

She is absolutely right. The key, surely, is to focus on the fact that agents and HMRC share a common goal of getting as many accurate returns filed as quickly as possible and the consequent common interest of making that process as efficient as possible.   

Tax Talks episode

Pragmatism above process

The speed with which the CJRS functionality was designed and delivered last year gained HMRC well deserved praise. I believe that taking away, just for a few weeks, a layer of bureaucracy that will otherwise burden taxpayers, agents and HMRC staff would be equally well received. And while a few might use it as an excuse to delay, I believe the overwhelming majority of agents would carry on cranking the conveyor belt to get returns completed and filed regardless.

There are precedents for an easement: the penalty soft landing on the introduction of MTD for VAT for example was a pragmatic step which recognised that the important thing was ultimate numbers filing, not timing. I agree that the messaging about tax payments still being due on 31 January must be clear, but I do not think that is an issue either: the successful MTD for VAT penalty relaxation also only applied to the return filing, not the related tax payment.   

I would therefore urge HMRC to reconsider, even at this late stage, the arguments put forward by the professional bodies and defer penalties for at least a month. This is a time for putting pragmatism above process.

Paul Aplin is a survivor of 23 January self assessment deadlines.

Replies (27)

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By LukeS
22nd Jan 2021 11:06

The only people late bringing information at this time of year are those who do it every year. COVID is just an excuse

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By Barbara G
22nd Jan 2021 11:51

Not quite "always an excuse" What about accountancy offices who have to shut premises suddenly and ask staff to self isolate due to contact with a covid case therein, for example, within two weeks of the SA deadline. I know there are a lot of cases for working from home and hats off to those who can make it work. But in reality, due to inadequate internet speeds of those who live more rurally, difficulty of supervision of inexperienced staff, working in the normal office setting, particularly at this time of year, is more productive. HMRC should show more leniency due to the restrictions of this pandemic. As Boris says, "We all must do it, to get through it" everyone except HMRC that seems to be

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By carnmores
22nd Jan 2021 13:16

file and amend as required , its simple

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By kenny achampong
22nd Jan 2021 14:20

Doing the tax return twice isnt going to be far off £100 for most accountants. Not me, but most probably are.

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By Paul Crowley
23rd Jan 2021 11:26

File a knowingly incorrect return may be your answer and Frankie's answer but not mine.
Have you considered the opinion of your professional body?

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By johnjenkins
25th Jan 2021 09:36

If you tick the box stating that you have used estimated figures then you are not filing an incorrect return.

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By carnmores
25th Jan 2021 11:40

Oh Please! No I retired after 30 years as an FCA , so I don't have to consider their opinion. I am entirely happy that what I do is within the rules. If anything I tend to limit deductions when filing if complete figures are not yet available, we're only human after all

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By Paul Crowley
23rd Jan 2021 11:43

https://www.accountingweb.co.uk/tax/personal-tax/tax-agents-dig-in-for-d...

But the taxpayer must still declare that the return is to the best of their knowledge correct and complete (TMA 1970, s 8(2)).

Where figures on the return are estimated this needs to be fully declared in the further information space on the tax return, including the basis on which the estimates have been prepared. Beware that HMRC warns in its SA manual: “Where it appears that a particular agent is filing a significant proportion of returns with provisional or estimated figures, you should inform the compliance manager.”

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By johnjenkins
25th Jan 2021 09:47

As we all know, Paul, HMRC interpretation of the law is sometimes geared to how they want to use it.
You really have to look at it pragmatically (for this year). Jimbo says covid is a reasonable excuse for sending in a late return. All we are doing is removing that uncertainty of having to believe what HMRC say. In the light of HMRC issuing £100 penalties for tax payers who have already submitted returns and we have not yet reached 31st Jan, I think it's not a bad idea (for this year).

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By carnmores
25th Jan 2021 11:47

To avoid missing out on this valuable SEISS grant, you can submit the 2021/20 tax return with estimated or provisional figures. This will be accepted by HMRC, pending submission of the final figures (as explained in HMRC’s self assessment manual SA121190).

this is clear

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By petestar1969
25th Jan 2021 10:07

I have one TR left to do, client sent the records 2 weeks ago but his pension P60's were for 2018/19. He is just waiting for copies of the 2019/20 P60's from the pension provider.

What's all the fuss about?

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By johnjenkins
25th Jan 2021 10:31

"what's all the fuss about". Petestar, sorry mate we can't all be perfect.

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By Ajtms
25th Jan 2021 10:44

Let's not forget that HMRC have contributed to the delays in SA production by keeping us waiting in unnecessarily long telephone queues and then leaving us with inexperienced HMRC staff that can't answer our questions. I am still waiting on HMRC to reply to dozens of my letters so how can we be expected to do everything for HMRC by the 31 January when they do nothing to assist us in the process. That must be grounds for appeal, but when will HMRC deal with the appeals when they have a 6 month backlog of my letters that need answering; the letters only being necessary because they won't answer the phone.

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Tornado
By Tornado
25th Jan 2021 11:28

1) For sure I will not submit any Tax Returns that are not complete or do not have the box ticked to show that estimates are included if that is the case. Submitting Tax Returns that are incomplete as though they are complete just to avoid a penalty is not a very professional action to take, especially if the client is unaware of this.

2) In the past, on the few occasions that Tax Returns have been late due to me, I have paid the penalties. Some people may think that is not very smart, but it is the right thing to do.

3) Tax Returns should not be submitted unless they are complete and approved by the client. If they end up being filed late due to the fault of the client, then the client most pay the fine.

4) I am absolutely sure that in a few days time, HMRC will announce that they have waived the late filing penalty for at least a month but they will probably leave interest and surcharges on tax paid late as it is.

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By johnjenkins
25th Jan 2021 13:20

Under normal circumstances and in a "normal" year I would whole heartedly agree. This has not been a normal year for a lot of people, so pragmatic decisions have to be taken. Knowing that HMRC would not extend and Jimbo gave us his "covid is a reasonable excuse" (yer right), I took the decision to contact my clients, that I knew would have problems with covid, and after discussing the situation with them and with their permission I duly submitted estimated figures, using 18/19 as a base, then adjusting with what the client felt was appropriate. Given HMRC track record I considered my actions to be professional and in line with my clients wishes.

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By johnjenkins
25th Jan 2021 14:13

Just heard HMRC have extended the deadline till end of Feb. What a farce Mr Harra.

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By carnmores
25th Jan 2021 14:22

correct and who is really surprised :-)

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By norstar
25th Jan 2021 14:59

I've just received the HMRC email saying they've waived penalties. I'd absolutely disgusted with their behaviour and it's potentially the last straw.

We have flogged our guts out to get our clients to file on time. We've worked Saturdays, evenings, mornings. Now with four and a half working days to go, they agree to do what they said they had no plans to do as recently as December.

Unprofessional, unsupportive, unacceptable. I will be writing to Jim Harra to express this.

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By johnjenkins
25th Jan 2021 15:19

He's only done it to try and save face. Jimbo you should've gone to spec savers earlier.

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By 2556950
25th Jan 2021 15:22

I am half relieved and half angry about this. Why wait until now HMRC? Have a bit of sense in this highly unusual year for goodness sake. We, as a profession, are working our fingers to the bone keeping the system turning and a bit of timely support should have been announced weeks ago.

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By 2556950
25th Jan 2021 15:22

I am half relieved and half angry about this. Why wait until now HMRC? Have a bit of sense in this highly unusual year for goodness sake. We, as a profession, are working our fingers to the bone keeping the system turning and a bit of timely support should have been announced weeks ago.

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By North East Accountant
25th Jan 2021 15:46

Dear Jim

Now you've listened to what us in the front line have been saying for months how about you listen further.

Scrap Domestic Reverse Charge completely and work on simplying VAT completely with a 1 year lead in time once all decisions have been made.

Delay for 3 years (if you won't scrap) Off Payroll Working in the Private sector.

Thanks

Yours NEA

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By Charlie Carne
25th Jan 2021 16:02

I'm not sure that I agree that HMRC have behaved badly in respect of this afternoon's announcement of a delay in the filing deadline. I suspect that they do not think that the vast majority of people need an extension and that, if they'd offered it earlier, it would have been used by those people as an excuse to delay. However, they realise that it would be a problem to issue perhaps a million penalties and then process a million appeals, so made the pragmatic decision (which they probably decided upon last week or earlier).

They could have left the announcement until late on Friday (29th) or even Sunday (31st) but, by doing so today, they have given help to that small number of people with real difficulties. If you were able to file it last week (no matter how hard you had to work to do so), you clearly didn't need an extension, so there's no point in complaining that you didn't get the benefit of one!

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By johnjenkins
26th Jan 2021 09:34

This is the thing isn't it Charlie? We have to trust HMRC yet they do not trust us. In the light of what has happened over the last few years, I doubt if many agents trust HMRC anymore. They would do well to take note of what we say and act upon it otherwise Boohoo could well make an offer for their online business.

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Replying to charliecarne:
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By norstar
26th Jan 2021 16:22

No sorry, I don't agree. They have told us one thing on 18th Dec and 18th Jan, then done another at the last minute. In answer to your point "If you were able to file it last week (no matter how hard you had to work to do so), you clearly didn't need an extension", I have turned away business because of what HMRC told us as recently at 18th Jan. It's also not fair to have created a situation where people worked on Saturdays etc to make the deadline, only for that not to have been necessary.

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By AS44NG
25th Jan 2021 16:36

I'm not one for usually defending the government/HMRC but in this case I think that they have done the right thing. Announcing this any earlier would have been an excuse for many clients to back off until the end of February.

We have around 15 tax returns to do, for around 5 of those we have yet to receive the full information. I have a feeling that those 5 will hear of this deadline and ignore our requests until the last few days of February at which point they will "struggle to get hold of me", if you know what I mean.

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By johnjenkins
26th Jan 2021 09:38

Clients who don't get their returns in under normal circumstances do it because they want to and will do it anyway.
There are genuine cases out there that have broken the law to get their accounts in to me so that their returns weren't late. Had Jimbo done the right thing and announced (for this year only) an extension until end of March he would have earned himself some brownie points instead of this farce

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