It`s all over for another year

Yes, "it`s all over for another year", this sound like something your parents would have said as they took the Christmas decorations down, unfortunately, over recent years this phrase has been adopted by tax professionals following the 31st January tax return deadline.

From the comments I have been hearing from other firms this was an especially tough January for a number of reasons, over recent years HMRC have extended the deadline to 28th February as part of the pandemic measures as there was increased pressure for everyone including HMRC themselves with staff absences. As a consequence the flexibility of an extra month has now been withdrawn resulting in less time available creating a pain point.

Interestingly, the penalty of ￡100.00 continues to be a deterrent for many even though the amount has not increased since the introduction of self-assessment in 1997. ?Could this be in part related to the cost-of-living crisis?

I recently conducted a poll to ascertain if the penalty should be increased and the results were overwhelmingly in favor of retaining the current rate, although 15% thought there should be an increase both to ￡500 and ￡1,000.?As you will remember from my last newsletter I mentioned that Making Tax Digital for Income Tax was being pushed back to 2026 and along with this is a new penalty regime (similar to the one introduced for VAT on the 1st January) although I question if MTD for ITSA will ever materialize and if so will it resemble in anyway or form what we have been led to believe (all for another day). ?

It’s worth noting this is only the first of the penalties, as of the 1st May and for the next 90 days there remains in place a ￡10 a day fine (￡900) and future penalty dates thereafter which could bring the overall ?penalty in to the region of ￡1,600 in total.

HMRC reported that the overall overdue tax returns this year was 600,000, in recent years this figure has exceeded one million. This is a major achievement as 12,060,872 Self-Assessment returns were due for submission this year.

HMRC also reported on their website

·???????11,733,465 (97.3%) returns received by 31 January. This includes expected returns, unsolicited returns and late registrations

·???????11,399,465 expected returns received by 31 January (94.5% of returns expected)

·???????10,965,993 returns were filed online (96.2% of returns expected, following adjustments)

·???????385,296 paper tax returns were filed (3.4% of returns expected, following adjustments)

?Myrtle Lloyd,?HMRC’s Director General for Customer Services, said:

“Thank you to the millions of customers and agents who got their tax returns in on time. Customers who have yet to file, and who are concerned that they will not be able to pay in full, may be able to spread the cost of what they owe with a payment plan”.

The final point is interesting as it is a long time belief of mine that many avoid preparing their tax return during the year in the misguided belief that once they submit the tax return they also need to pay the outstanding tax.

For clarity a tax return can be submitted to HMRC on any day from 6th April to 31st January, the tax payment is only due to be made on the 31st of January.

Once again, I have always believed that preparing your tax return at the earliest opportunity provides the taxpayer with an opportunity to plan how they will settle the tax liability, unfortunately submitting in January leaves you with little options if you have not made any provision throughout the year. ?For those of you who receive tax refunds claiming this in January is ludicrous when the funds could be working for you in your own bank account if claimed earlier in the year.

I anticipate after reading many articles in professional periodicals, that accountancy firms will attempt to gently persuade clients to be more organized throughout the year by increasing the fees for tax return preparation after the 1st of November.?After speaking with another firm recently they told me that they had written to their clients asking them to consider the extreme pressure this put their employees under not only in January, but also in December which was already a short month due to Christmas.?This could be a case of watch this space. ??

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Have you paid HMRC yet?

If you have not yet paid your outstanding tax bill, you should be aware that interest accrues daily on all outstanding amounts and that a further 5% charge is levied if the payment is not made in full before the month.

For those of you struggling of which there are many you should contact HMRC to discuss a Time to Pay Arrangement

Telephone: 0300 200 3835 Monday to Friday: 8am to 6pm

Send those questions in

As you might have expected many of the questions I have received lately have been heavily focused on personal tax returns however, both myself and my team have a vast knowledge base from Income Tax, Corporation Tax, Capital Gains Tax to Inheritance Tax and even Trusts.

So why not send a me a question and you never know it may appear as an article or even as a video on my YouTube channel.

You can either send a direct message or email me at [email protected]

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Jonathan Reeves