According to HMRC some 12.2 million people were expected tofile a 2020/21 tax return by 31st January 2022, the official filing date. Oneweek before this date there were still 4 million returns outstanding – nearly athird of them!
Quite surprisingly HMRC has decided that it will waive late filing and late payment penalties for self-assessment taxpayers so long as they file their tax returns and pay any tax due by 28th February. This is in recognition of the pressure experienced this year by taxpayers and their agents. Do you really believe it? You can be pretty sure that any relaxation of rules of this nature is to help HMRC cope with its own pressures including dealing with thousands of appeals against statutory penalties.
Under the waiver, anyone who cannot pay their self-assessment tax by 31st January will not receive a late payment penalty if they pay tax in full or set up a time to pay arrangement by 1st April.
Importantly, the deadline to file and pay remains 31stJanuary 2022, so most other claims and elections usually made through the tax return should have been submitted by that date.
HMRC confirms that interest will be payable from 1st February as usual so it is far better to pay on time if possible. The time-to-pay service gives individuals or businesses the option to spread their tax payments if necessary. Self-assessment taxpayers with up to £30,000 of tax debt can do this online after they have filed their return.
Incidentally the late payment interest rate rose to 2.75% from 4th January 2022 for the main taxes and duties. The previous rate of 2.6% had been in force since 7th April 2020.
The tax profession has welcomed HMRC’s announcement. In their view this will give valuable breathing space to many taxpayers and their agents and will help to avoid potentially damaging fines at a critical time. It will also help to reduce the impact of unnecessary stress due to Covid -related absences on agents. It was also help agents when appealing such penalties and endeavouring to scrape together sufficient criteria to constitute “reasonable excuse” which is always open to interpretation.
It will be interesting to see whether this relaxation really is effective. Human nature being what it is the existence of a deadline helps to focus the mind and get the job done. Defer the deadline and you simply push everything down the road for another four weeks.
But there is a wider consideration. The Government is doing its level best to bring taxation into real time. It has the authority, it has the legislation, it has the technology – in a word it has all it needs in its toolbox. And it is moving inexorably closer and closer to real time accounting and tax reporting. Making Tax Digital will greatly advance all this but make no mistake – it won’t stop there. Technology is opening new ways of applying the tax code. Our dilatory self-assessment colleagues are in for a shock. At very least they should get up to date, stay up to date and benefit from the many changes round the corner.
C & H Stedman are here to advise.