Are HMRC getting more from you than they should?

There has been a flurry of activity from HMRC recently, all designed unfortunately to raise more money for the treasury.

Firstly, HMRC have issued late filing penalty notices for all 2013 tax returns that weren’t submitted within the deadline of 31 January 2014. Secondly, a 5% surcharge was added to all tax due for 2012/13 that remained unpaid as at 28 February 2014 this is in addition to interest that has been accruing since 1 February 2014 and which continues to run. A great deal of taxpayers who have suffered the above blows will no doubt incur further penalties, interest and possibly surcharges as these ramp up over the coming months.

It will be worthwhile for any such taxpayers to have a look at the late filing penalties, interest and surcharges detailed below, because failure to act quickly will bring additional costs which will escalate at a frightening pace.

Late Filing Penalties

  • 1 Day to three months late (i.e. filed after 31 January) £100, this is charged regardless of whether any tax is outstanding.
  • Over 3 months late (i.e. filed after 30 April), further penalties of £10 per day up to a maximum of 90 days making a total of £900 in addition to the £100 already charged if your return is still outstanding as at 1 May.
  • If six months late (i.e. outstanding as at 31 July) a further penalty of £300 or 5% of the tax due, whichever is the higher, again this is in addition to the earlier penalties.
  • If 12 months late (i.e. outstanding at following 31 January) another £300 or 5% of the tax due, whichever is the higher and again this is in addition to all other penalties already charged.

Note that in serious cases HMRC may ask you to pay a penalty of up to 100% of the tax due instead.

Penalties may be cancelled in cases where there is a reasonable excuse for it being filed late. You should note that HMRC have a very limited view of what constitutes a reasonable excuse and will only cancel penalties where a return was filed as soon as whatever caused the reasonable excuse ended.

Example

If a late tax return is filed by say the end of August and there isn’t a reasonable excuse then late filing penalties at 1,2 & 3 above will have been applied. If the tax due was less than £6,000 then the penalties charged will total £1,300. If the tax due is higher than £6,000 then the penalty at 3 will be 5% of the tax due and the total will of course be higher than £1,300.

Interest & Surcharges

Surcharges
All surcharges are applied in addition to any earlier surcharges.

  • Pay later than 30 days after due date 5% surcharge.
  • Pay later than 6 months after due date 5% surcharge.
  • Pay later than 12 months after due date 5% surcharge.

Interest
Interest runs automatically on all late payments of tax. The current rate applied is 3% and this is calculated on a daily basis until such time as the tax is paid. You may have guessed given everything that has gone before, but we can confirm that interest is charged on the tax and also any penalties and surcharges charged to your self assessment statement of account until the liability is settled in full.

Conclusion

If you should have filed a return but haven’t because you are struggling to complete it, it will be cost effective to pay a tax adviser to complete and file it on your behalf.

If you have submitted your return but can’t afford to pay all of the tax then don’t just ignore it, it won’t go away and it will increase. We can assist you in agreeing a “time to pay” arrangement with HMRC which will stop surcharges and penalties being applied.

If any of the above has affected you this year then please do call us and let us help you, it will save you money in the long run.

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