The changes will affect self assessment returns for 2010/11. The deadlines for returns are unchanged -- October 31 for paper returns and 31 January for online returns. The deadline for paying tax due is still 31 January.
The new penalties for late Self Assessment returns are:
An initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time;
After three months, additional daily penalties of £10 per day, up to a maximum of £900;
After six months, a further penalty of 5% of the tax due or £300 whichever is greater
After one year, another 5% or £300 charge -- whichever is greater. In serious cases the penalty after 12 months can be up to 100% of the tax due.
New penalties for paying late are 5% of the tax unpaid and will be applied at 30 days, six months, and 12 months. Interest will also be charged on top of these penalties.
Someone whose tax return is due on 31 January 2012, but which HMRC doesn’t receive it until 5 August 2012 would be over six months late, explains HMRC in an online example. The person would then have to pay a £100 fixed penalty; a £900 penalty (£10 each day from 1 May to 29 July, when the maximum 90 day penalty is reached); and £300 or 5% cent of the tax due - whichever is the higher.
Richard Godmon, tax partner at accounting firm Menzies, said that taxpayers could “inadvertently find themselves on the wrong end of a significant penalty” simply because they correctly thought all their tax had been paid, and that was the end of their obligations
“HMRC need to make very sure that they do not issue notices to submit a return without good reason, and they publicise these penalties widely,” he said.
HMRC said it has sent just over 10m self assessment returns/notices for the 2010/11 tax year.
George Bull, senior tax partner at Baker Tilly, said taxpayers who cannot be sure of getting a paper return in on time should usually try to arrange to file electronically instead. “Once a paper return has been submitted late this cannot be overridden by also submitting an electronic return,” he said.