Strike while the penalties are hotby
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.
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.