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blacksmith at work with red hot metal | accountingweb | strike while the penalties are hot

Strike while the penalties are hot


Almost 10% of taxpayers failed to meet the 31 January deadline. While this is unfortunate for those incurring late penalties, it presents an excellent opportunity for accountants.

8th Feb 2024
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It is sad to say that, yet again, my top new year’s resolution has bitten the dust. I thought that it would be easy to avoid the temptation to write about the horrors of the tax-return season but this annual torment always seems to throw up unexpected outcomes.

If you are the Chancellor of the Exchequer, £110m might sound like a drop in the ocean. For mere mortals, including whole firms of accountants, it could be life-changing.

Assuming that media reports are correct, this is the amount that taxpayers are due to hand over in £100 penalties for failure to submit self assessment tax returns by the 31 January 2024 deadline. The “profit” for the Treasury is almost certainly much larger since many will also fail to pay their liability on time and are currently clocking up interest.

What is going on? There is plenty of time to do the work and hordes of advisers begging to help, in exchange for a pleasingly modest fee. You therefore have to wonder why not far short of 10% of those required to submit a return to HMRC could not do it on time.

In addition, compared to the good old days when returns had to be completed and submitted on paper, the process of filing a return is relatively easy.

Cutting it fine

There has to be every chance that a significant proportion of the 1.1m individuals who failed to file will have only a handful of entries, an average say of one every couple of months from the end of the tax year.

A survey carried out by Pie Tax yields results that some might regard as “interesting”, others as “shocking” and this accountant as “unbelievable”. One in six of those required to do so had not completed their self assessment tax returns by midnight on 30 January. This means that something like 8% were slogging away on the final day.

There is also work for psychologists and perhaps even psychiatrists since, apparently, 73% of the self-employed regard tax management as their biggest mental-health drain.

Personally, I would take this with more than a pinch of salt. It is hard to believe that almost three-quarters of the self-employed regard managing their taxes as more onerous than keeping their businesses alive, dealing with divorce and bereavement or even minor irritations like dealing with the cost of living and fending off utility companies.

It is easier to accept that 13% of self-employed workers are on an HMRC default payment plan and 11% of our fellow countrymen and women have needed a credit card or personal loan to pay their tax bill. Once again, drilling down might prove the latter statistic to be a little misleading, if most of those loans were there to pay a part of the bill or this is just the tip of a fast-sinking financial iceberg.

Do it themselves

Finally, comes the news that will put a smile on the faces of many accountants. Apparently 25% of the self-employed have such trouble with their tax returns that the project takes them a week or more. Once again, we would need to know whether the week was spent poring over papers and a computer or merely completing the occasional entry at the end of each day.

Even so, you have to imagine that as soon as they have recovered from the rigours of last month, many in practice will embark on a major marketing exercise to persuade self-employed workers that they are far better off handing over their tax affairs to an expert. In return, they can spend the week that they save doing what they are best at and earning far more than they will pay in compliance fees, reduced by what might effectively be a £100 subsidy from HMRC.

What does all this tell us? Perhaps that Brits need a crash course in financial management, accompanied by some lessons in form filling.

It also makes clear that regardless of scare stories about artificial intelligence killing off the profession, at the moment there are still plentiful opportunities if you know where to look.

Replies (4)

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By FactChecker
08th Feb 2024 22:09

"a major marketing exercise to persuade self-employed workers that they are far better off handing over their tax affairs to an expert. In return, they can spend the week that they save doing what they are best at and earning far more than they will pay in compliance fees"

On what planet?

I'm sufficiently educated to understand cost-benefit analysis, but I've yet to meet a single taxpayer in the group (loosely described by Philip as self-employed workers) who understand the concept - neither intellectually nor in pragmatic terms.
Most of the time that they spend "doing HMRC's work for them" (as one said today when bemoaning the effort consumed in managing CIS and VAT for his small specialist contractor refurb business) is achieved by sacrificing their family/sleep/health (and potentially sanity) on the altar of not falling foul of HMRC.
They are never going to forego revenue-generating work just to keep HMRC happy - even though you and I may 'know' that this is extremely short-sighted of them.

Instead of cynically treating them to a spiel (they get enough of those from HMRC and from software companies), try telling them the truth ... what they should really be 'buying' is protection from the unexpected and the opportunity to enjoy a few of their non-working hours.

Thanks (1)
By codling
09th Feb 2024 10:42

How many supposed missed returns relate to people who have fallen outside the self-assessment criteria but HMRC have not picked up on it and have not issued notices to say future returns would not be required?
Where I send a return in for what should be the final year of self-assessment there is always a note in the white space advising that future returns are not required as well as showing the usual cessation dates for self employment etc. but it is incredible how many of these are missed/ignored and filing notices issued for the next year. This just causes further hassle for me and for HMRC in getting them cancelled.
I am now waiting for what other surprises may be in store when the penalty notices are issued. I have just been checking on one client where HMRC confirmed by letter some months ago that the 21/22 return was the last required one, but looking online there is still a 22/23 notice to file. Penalty notice awaited to which formal complaint will be made.
It seems that there are very few people left in HMRC who can do their jobs properly leaving us to correct the mess left by them.

Thanks (2)
By WallyGandy
09th Feb 2024 10:55

Errrr Hang on. If taxpayers habitually leave it until the very last minute, I see no benefit in a "marketing exercise" to entice these people to any Practice.
All that will happen, I feel, is that they will turn up at the 11th hour on 31 January with about 50% of the information and pass the pressure onto their accountant.

I make it crystal clear- FULL information with us by 30 November or no guarantee it will be filed as 31 December for limited companies (and the fact that Accountants don't work over Christmas)

Anyone who doesn't comply is surcharged over £100 for unsociable working hours AND payment in full before we file. These creatures of habit ruin services to more decent clients AND reduce staff morale.

But that didn't stop the "last minuters"- so instead we took holiday leave late January last year.

Best to say "remember the £100 fine last year?". Well stick to our reasonable request and it won't happen again. Work with us, not against us.

Still remember a habitual 30 January case. He owed £5k with PoA no1. Then there was HIS understatement of income for Tax Credits. He had spent the lot on holidays, new car etc. A grown man literally crying in the Office was a new one. He paid and I invited him to go elsewhere. The usual abuse followed....... Duck's back for us.

Thanks (0)
By Husbandofstinky
09th Feb 2024 13:49

As already mentioned above, I don't know how many of these 1.1 million fines will actually come to fruition once HMRC eventually catches up. I would be stunned if anywhere near 50% of those were bonide fails.

With regards to the potential opportunity of these remaining potential clients, let the young, keen and eager have them. They are welcome to it. These jokers are more often than not those that cause most problems year in and out (especially in January).

If I had a £1 for every time someone said 'I will bring it in earlier next year' I would be typing this on some beach in a far away land and would be out of this profession.

Very rarely does a leopard change its spots

Thanks (1)