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HMRC to allow tax returns to be filed up to a month late

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HM Revenue & Customs last night made a U-turn on its previous decision not to waive penalties for tax returns submitted after Sunday’s deadline despite the coronavirus pandemic.

The tax authority had previously said that they would apply the automatic late-filing penalties as usual, although they would have accepted pandemic-related disruption as grounds to appeal the £100 fines, in spite of being warned that millions would miss the deadline because of the pandemic.

However last night, after demands from advisers and professional bodies, HMRC confirmed that they automatic levies would not be applied as long as people complete their returns by February 28, effectively deferring the deadline by a month.

An estimated 2.5 million workers are believed unlikely to get their forms done by the original online deadline of January 31 — nearly three times the number for last year.

Although they heeded calls to suspend the tax return deadline, HMRC resisted lobbying from self-employed individuals who have seen their profits greatly reduced by the pandemic for an amnesty on their 2019-20 tax bills.  Workers will still be subject to an interest charge of 2.6 per cent on unpaid tax unless they negotiate a payment plan.

Accountancy firms said many who were struggling to file their returns had either been ill with covid-19 or had to care for sick family members or homeschool their children, while accountants were struggling to cope during what is typically the busiest season of the year through staff absence.

“It has become increasingly clear from the filing rate that some taxpayers and agents cannot file on time and the department has now determined that ensuring no customer will receive late filing penalties if they file online before the end of February is the best way to help them,” said Jim Harra, chief executive of HMRC.

About 3.2 million of the anticipated 12.1 million self-employed workers, landlords, pensioners and those with second incomes have not yet filed their self-assessment tax returns.  Of these, about 2.5 million were likely to miss the deadline altogether and incur fines, according to a report published last week by the Association of Chartered Certified Accountants (ACCA), which would have been nearly triple the 958,300 who missed the deadline last year.

Dawn Register, the head of tax dispute resolution at the accountant BDO, said: “This is a very welcome move … 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.”

Commentators welcomed the decision by the tax authority but were critical of the timing, with less than a week to go before the original tax return deadline. “It’s quite unbelievable that HMRC have decided, with less than a week to go before people need to file their tax return, to extend the deadline by a month,” Nimesh Shah, chief executive of Blick Rothenberg accountants said.

26th January 2021.