HMRC waives late filing tax return penaltiesby
For the second year running, HMRC is waiving late filing penalties on tax returns for one month as the Covid pandemic continues to wreak havoc on the capacity of agents.
HMRC has announced that self assessment taxpayers will get an extra month to file their tax returns without incurring a fine, although interest will still accrue.
The news comes as rising Covid cases have squeezed capacity levels of accountancy firms and taxpayers, with self isolation rules and sickness causing strain for many in meeting the 31 January deadline.
While the waiving of penalties means taxpayers won’t receive a late filing penalty if they file online by 28 February (and payments by 1 April), HMRC is continuing to encourage agents and taxpayers to file before the 31 January deadline as interest will still be payable from 1 February, as usual.
Today’s announcement comes much earlier than the same news last year, when agents were working up until 25 January under the assumption that the 31 January deadline was still intact.
Breathing space for taxpayers
Lucy Frazier, the first permanent secretary to the Treasury, said the late filing penalty waiver will give millions of people “more breathing space to manage their tax affairs” as “Omicron is putting people under pressure.”
“Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead,” she added.
Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, struck a similar tone: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19.
“Our decision to waive penalties for one month for Self Assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”
Numbers were tracking similar to last year
The tax authority has revealed that almost 6.5m taxpayers have already filed their tax returns, which leaves around 5.7m still to submit.
This figure is slightly below the same figure this time last year, when 6.6m had filed their tax return and 5.4m had then until the 31 January to complete theres. While on 31 December 2019, HMRC had received 6.3m tax returns.
Early signs were that the numbers were tracking at the same levels as previous years. Take Christmas Day for example; this year 2,828 returns were filed, which is ahead of the 2,700 taxpayers that filed on the same day in 2020. Meanwhile, 19,802 returns were filed on Christmas Eve, 8,641 on Boxing Day, 33,467 on New Year’s Eve and 14,231on New Year’s Day.
Agents called for SA deadline relaxation
However, word started spreading on Any Answers before the New Year that agents were struggling to keep on top of their self assessment workload as the Omicron variant ripped through firms.
AccountingWEB regular Marks first alerted others of the potential self assessment deadline bottleneck as since returning to the office in August many of his staff have been off with Covid or self isolating.
As of 31 December, he said that his firm had only filed 13% of tax returns, with 18% out with clients, 17% to be reviewed, 6% in progress and 26% not even started.
Quickly, other readers came forward confessing that they were also buckling up for a tough January.
Jajo called for an extension of some description, calling the problem this year different to last year’s with the number of days lost to staff with covid or working from home due.
“With somewhere around 50% of staff with covid or isolating, 31 January deadline is looking difficult. Already had my first staff member saying they came down with Covid on New Year's Day. I doubt they will be the last and working from home won't be helpful in dealing with papers coming in over the next two weeks.”
Still quarantining hand delivered records three days before opening them, AS44NG predicted today’s announcement. “Covid has certainly had an impact on the delivery of information to us, couple that with HMRC's appalling service at the moment and I can only imagine that the government will concede that there are additional obstacles in the way of the usual filing deadline.”
That is not to say everybody was feeling the strain. A chorus of readers echoed similar thoughts to Williams Lester: “A deadline extension gives some clients a new excuse to not bring their paperwork in on time.”
Not quite like 2020
The early announcement of penalty waiver for the 2020/21 is a stark contrast to last year, when HMRC had stood firm on the deadline despite calls from the professional bodies to either extend the deadline or waive late-filing penalties.
HMRC responded to each call that it was keeping the situation under review, but it wasn’t until seven days before the deadline that HMRC chief executive Jim Harra said that it “has become increasingly clear that some people will not be able to file their return by 31 January” and opted to give taxpayers “the breathing space they need to complete and file their returns”.
Advisers welcome the announcement
Already the news has been welcomed in by many in the profession. Dawn Register, head of tax dispute at BDO, is still encouraging those with tax returns prepared to meet the 31 January deadline but has called the news "a huge relief to those facing tax bills, alongside other household debts in January”.
"HMRC clearly understands that those severely impacted by Covid-19 should not face receiving a ‘brown envelope’ in February as it would result in unnecessary angst.
"This additional time will provide taxpayers and advisers with crucial latitude, which is needed in these unprecedented times. Previously, taxpayers would have needed to rely on adhering to HMRC’s ‘reasonable excuse’, which is open to interpretation – so this new certainty is very timely”.