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SA late filing penalty U-turn prolongs the pain

Philip Fisher believes that accountants should have mixed feelings about HMRC's very late decision to suspend tax return penalties.

26th Jan 2021
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A picture of a U-turn road sign

If there is one thing that has become increasingly apparent over the last 10 months, it is the willingness of the current government to change its collective mind.

Unfortunately, far too often this only occurs long after the proverbial horse has bolted.

The latest example of that phenomenon is of vital interest to the vast majority of accountants. On Monday 25 January, less than one week from the deadline for filing self-assessment tax returns, which inconveniently occurs on a Sunday in 2021, HMRC has announced a change of heart.

As predicted in this column only a few weeks ago, the deadline has effectively been deferred for a month. Technically, that is not quite correct but penalties for late filing will not be levied until 28 February. This means that, to all intents and purposes, last-minute managers and those with clients who pursue such policies can breathe a hefty sigh of relief.

For the avoidance of doubt, interest will still be chargeable on any tax that is not paid by the due date of 31 January.

What did HMRC announce?

HMRC chief executive, Jim Harra, announced the change in the following terms: “We want to encourage as many people as possible to file their return on time, so we can calculate their tax bill and help them if they can’t pay it straight away.

"But we recognise the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by 31 January.

"Not charging late filing penalties for late online tax returns submitted in February will give them the breathing space they need to complete and file their returns, without worrying about receiving a penalty.

"We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic.”

What does this mean for accountants and agents?

Readers will be asking themselves why, at any point in the last 10 months, had it not become “increasingly clear” to HMRC that many taxpayers would have other priorities, such as protecting their health and caring for loved ones.

Perhaps the underlying explanation is that department has not yet hit what is almost certainly a challenging U-turn target for the current financial year?

Suddenly, a week that was looking hellish can become akin to a holiday, and for some that is probably exactly what will happen.

This week was always going to be awful but the payoff was the knowledge that come 1 February, we could all relax and forget about tax returns for a few weeks.

Instead, we might discover a four-week hiatus followed by a repeat dose of the agony in the last week of February.

What should accountants do?

As Harra has suggested, wherever possible based on long experience, this tax specialist would urge all of his peers up and down the country to get all of the tax return work done this week. Failing that, ensure that all outstanding returns are cleared up in the first days of February.

Indeed, if those running private client practices have the option, I would strongly suggest that they do their damnedest to hide this new information from any clients or colleagues who might immediately seek to take advantage.

Otherwise, what should have been a mini-nightmare will become prolonged torture.

This might also be the time to setup a pressure group to ban those who leave anything and everything until the last minute, inevitably putting great stress and pressure on themselves but also anybody with whom they come into contact.

Any Answers Live

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David Ross
By davidross
27th Jan 2021 09:39

I agree with Philip - don't tell anyone about this !

A major reason that I entered January this year with four SA Returns to do instead of the usual 150 was that I threatened to resign from recalcitrant clients on 30 November (a hard deadline having been declared for 31 October). I am considering bringing next year's hard deadline forward to 31 July.

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