A tax return season like no other
This year, we face unprecedented problems in completing some tax returns. Philip Fisher reviews the position and looks at 'reasonable excuse' during a pandemic.
Writing about all of the problems that accountants and their clients make for themselves in the weeks leading up to the tax return deadline can feel tedious and repetitive.
Every year we suffer from the pain of dealing with last-minute managers and, dare one suggest, some of us may even fall into that category.
At the other end of the scale, these columns tend to elicit somewhat sarcastic responses from those that completed the task several months ahead of a deadline that they and their clients don’t even notice.
However, the 2020/2021 tax return season is going to be characterised by a number of new considerations that will sometimes have made the process of completing returns in accordance with legal obligations easier but in certain cases may make it absolutely impossible.
Completing tax returns on time is hard enough in normal times and far worse in the heart of a pandemic.
The good news
One big positive is that so many clients who typically leave everything until the last minute, obsessed by their own businesses, enjoying their social lives and taking long holidays in warmer climes will have had an opportunity to concentrate wholeheartedly on their tax returns, the alternative being another evening watching people on television dancing badly or cooking meals that they never have the chance to taste.
We are also extremely lucky to have reached a point where almost all accountants prepare tax returns on computers, can share data amongst members of staff with the greatest of ease and, perhaps best of all, can submit the vast majority of returns electronically.
Typically, in November, December and January accountants’ offices are rammed with staff completing tax returns, with holidays beyond those around Christmas out of the question.
This time around, it may not quite be illegal for employees to come to work but it is certainly strongly discouraged by those in the seat of power.
In any event, turning up at the office presents a serious health risk to all concerned and therefore should be avoided wherever possible.
This makes the tax return process more difficult, although technology has helped. It is that much harder to keep an eye on staff and to gauge the quality of the work that is being produced, especially when they are under the greatest pressure as the deadline looms.
It is also likely that there will be unprecedented levels of absence as a result of illness (and childcare), since coronavirus is raging out of control – and that is the health minister’s assessment not that of a hysterical journalist.
Client sickness and bereavement
While some clients will have submitted returns unprecedentedly early, others will be unable to do so for the saddest reasons. Either they or members of their families may be seriously ill, confined to hospital or stuck at home for weeks unable to function normally. In even more extreme circumstances, bereavement may be an unavoidable reason for failure to take any interest in providing the data necessary to complete a tax return.
That brings us to the question of what might constitute a reasonable excuse, always a bony thorn of contention between HMRC and tax advisers.
Indeed, there has to be a possibility that, in these unprecedented times, HMRC (or to be more accurate a Treasury minister) decides that the deadline can be delayed or perhaps more realistically any penalties waived either for a fixed period or completely.
Unless that is the case, we will need to resort to applications related to reasonable excuses. There can be little doubt that death or the kind of illness that leaves somebody in hospital will constitute a reasonable excuse that is instantly accepted.
The question is how much further HMRC is willing to bend this year. One obvious example might be an elderly or sheltering client who has no access to technology and therefore is unable to deliver the necessary documentation to prepare their returns.
Similarly, there are still a limited number of situations in which electronic returns are not permitted. According to the HMRC website
“You cannot file a Self Assessment tax return online:
- for a partnership
- for a trust or estate
- if you lived abroad as a non-resident
- to report ‘chargeable gains’, for example from life insurance
- if you get income from a trust, you’re a Lloyd’s underwriter or a religious minister
In those cases, there may well be strong arguments for reasonable excuses in delaying the submission of returns, especially since come 31 January 2021 we will still almost certainly all be enjoined on a constant basis to “stay at home”.