Kirkpatrick & Hopes - Succession Planning Accountants

Call us on: 0118 923 5800
Email us: mail@kirkpatrickandhopes.com

Penalties for being late (and how to avoid them)

I hope you all managed to send in your 2010 tax return on time.

My thanks go to Neville Daniels from Wrigley Partington for spotting the error in my last blog post.

The automatic penalties for sending in a late tax return, even though no tax is due, apply next year and not to tax returns for the year to 5 April 2010.

This means a late tax return for 2010 will not incur a penalty provided that all of the tax due for the year has been paid by 31 January 2011.

However, the Late Tax Return Penalties are to be increased for future returns.
The proposal is that increased penalties will apply to any late tax returns for the year to 5 April 2011. The last filing date for this return is 31 January 2012.

A late return will incur the following penalties:

• Returns sent in after 31 January – automatic penalty of £100 even if no tax is payable
• More than 3 months late – an additional daily penalty will be payable
• More than 6 months late – an additional penalty of £300 is due (or 5% of the tax due if this is higher)
• More than 12 months late – an additional penalty of £300 is due (or 5% of the tax due if this is higher)

I have recently brought up to date some outstanding tax returns for a new client. I prepared three outstanding returns that showed tax refunds. The refunds were repaid in full.

Under the new system of penalties, the client would have been liable to penalties of at least £2,100 (£700 per year plus a daily penalty) even though no tax was due.

Penalties for Late Paid Tax also increases.
If you pay your self-assessment tax late, the Revenue charges you interest but also charges a penalty on any tax that is currently outstanding as follows:

• Any tax due for the year to 5 April 2010 that is still outstanding at 28 February 2011 is subject to a late payment penalty of 5%
• Any tax due for the year to 5 April 2010 that is still outstanding at 31 July 2011 is subject to a further late payment penalty of 5%

For 2011 returns, the penalties increase to:

• Any tax due for the year to 5 April 2011 that is still outstanding at 28 February 2012 is subject to a late payment penalty of 5%
• Any tax due for the year to 5 April 2011 that is still outstanding at 31 July 2012 is subject to a further late payment penalty of 5%
• Any tax due for the year to 5 April 2011 that is still outstanding at 31 January 2013 is subject to a further late payment penalty of 5%

I believe the answer to avoiding any penalties is to keep your tax affairs fully up to date. My advice is to have your tax return prepared – or prepare it yourself – well before the deadline.

Do not put yourself and your adviser under pressure by supplying the information or completing the return in January. Why not aim to have the form completed by the end of the summer?

Leave a Reply