ICAS urges HMRC to suspend SA late filing penalties
HMRC should automatically waive late self assessment filing penalties up to three-months as some firms are significantly behind on their tax return progress due to the impact of coronavirus, according to ICAS.
Bruce Cartwright, the chief executive of the Scottish accountancy body, has written to HMRC’s Jim Harra to highlight the effect the coronavirus pandemic is having on the already intense build up to the 31 January peak period.
As a result of the combined effects of the coronavirus and the intense January workload, the professional body’s chief executive reports that some firms are significantly behind compared to prior years in the number of tax returns progressed or completed.
Cartwright called on HMRC to automatically waive penalties for up to any three-month delay in an annual tax return filing for those returns due between now and 30 June 2021.
“Accountancy and tax agent firms are operating under great stress and are the unsung heroes of implementing the CJRS and SEISS and for enabling the Chancellor’s schemes to keep many employees and businesses going in these extraordinary times,” he wrote in the letter.
“Such firms are caught in the middle between HMRC and their clients and facing difficulties due to coronavirus; they are trying to help client businesses but not getting any help with their own businesses.”
Cartwright adds that the three-month late filing penalty delay should be automatic and not require an appeal because “the costs of doing so in terms of our time would outweigh the saving of a £100 penalty”.
The impact on the compliance cycle
The build up to 31 January is always a period of intense pressure, but ICAS went on to list the aggravating factors brought on by the pandemic which are causing a significant backlog of work for accountancy and tax agent firms, including:
- Some clients have stopped sending in accounts due to staff on furlough and working from home restrictions.
- Some accountancy firms are struggling with the practical difficulties of working from home, such as accessing information and IT systems.
- Smaller firms are spending a significant amount of time assisting clients with CJRS and SEISS claims.
- A capacity crunch within firms is already forcing long work hours - and senior partners are concerned about asking employees to work even longer hours.
- Clients are working to the three month Companies House filing deadline extension, meaning the corporation tax information for returns is not always available on a timely basis.
- The strain on corporation tax extends to iXBRL tagging of accounts, which is typically undertaken by those finance teams or agents who are already pressured by accounts and/or tax filing deadlines. The pressure from the pandemic also affects the preparation of related filings such as that for CIR, group relief and CFC.
The accountancy body notes that it’s not just Covid-19 that’s disrupting the traditional compliance cycle; agents will also have to assist businesses implement changes arising from Brexit.
ICAS also called on HMRC to accept that “agent pressures of work in these trying circumstances of the pandemic will be accepted this year as a ‘reasonable excuse’ for late filing”. Rebecca Benneworth agreed on this week’s Any Answers Live, saying they need to “have someone take the paper out of the printer so they don’t print them in the first place”.
Profession split on how to mitigate impact on busy season
ICAS’s call to waive self assessment penalties goes one step further than ICAEW, who is seeking views on whether it should ask HMRC to extend the self assessment deadline or waive the penalties.
AcccountingWEB members are split on what should be done to mitigate the Covid workload pressures as the self assessment deadline approaches. In a poll conducted last week, 47% of respondents backed an extension to the deadline, while 44% believed waiving late penalties is the answer, and 9% disagreed with any invention and voted for the deadline to remain as 31 January.
On this week’s Any Answers Live, practice owner and coach Della Hudson backed the call to waive penalties, rather than extending the deadline.
“The accountants I work with generally got ahead on their self assessments earlier in the year. They found that a lot of their clients, because the business was quieter, were getting on with their tax and accounts,” she said.
“[Firms] who aren’t ahead - as I know some furloughed staff or shut down - will be under pressure. But it is a lot easier to waive the penalties for a couple of months than shift the deadline, because you have people claiming universal credit who still need all those figures up-to-date.”
Rebecca Benneyworth said extending the deadline would be a “huge task” as there are so many other elements tied to the 31 January date, such as certain loss claims, IR35, Class 2 NIC - the list goes on.
Instead, she’s also in favour of a two month moratorium on penalties. “I did get ahead, but the trouble is for sole practitioners who don’t have staff have been doing the normal, and on top of that they’ve been trying to get their heads around CJRS (version one, two and three), SEISS and the rest of it and I know there are accountants at the end of their tether,” she said.