Tax Return Penalties 2021

HMRC have responded to a letter from all the main accounting bodies to extend the January 31st tax return deadline this year and remove tax return penalties. HMRC’s chief executive Jim Harra said to do so would encourage some taxpayers to file late despite being able to do so in time.

HMRC will not waive late filing penalties or extend the 31 January deadline

So HMRC will not waive late tax return penalties or extend the 31 January deadline, but it will extend the period to appeal a penalty and treat pandemic related issues and agent delays as a reasonable excuse. Given the pressure that taxpayers and accountants have been under over the past year, this is a welcome concession. However, HMRC’s Harra said the proposal to waive late filing penalties for a short period after 31 January would ‘complicate HMRC’s self assessment message and would ‘send a blanket signal that it is OK to file late. De-coupling the payment and filing dates might confuse customers, and even lead to non-payment, interest accruing, and late payments being triggered.’

He also argued that filing on time means that taxpayers would be aware of their liability and be able to access HMRC’s support in spreading payments where necessary. HMRC’s guidance on spreading tax payments is available online and there is a Payment Helpline and Payment Support Service you can call to arrange this, though it’s best to do so as soon as they open at 8am.

No penalties for late filing caused by Covid delays

HMRC has though accepted that some taxpayers and agents will not be able to file on time due to the impact of coronavirus and the HMRC chief executive said that these taxpayers should get their returns in as soon as they can and they will not be penalised if they need more time.

This is short of a blanket waiver of late tax return penalties but HMRC say they will accept pandemic-related disruption caused to the taxpayer’s business or their personal circumstances as a reasonable excuse. Similarly they will accept as a valid reasonable excuse that agents may be delayed in filing a return due to the pandemic affecting their ability to provide their services.

Extended period for appealing late filing

These taxpayers will still receive a penalty notice, but Harra said that either the taxpayer or their agent can get the late filing penalties ‘cancelled easily’ by contacting HMRC. HMRC will also extend the appeal period from one to three months to give taxpayers and agents more time to deal with appeals.

Harra ended his response to the accounting bodies by saying, ‘I understand and sympathise with the extreme pressures your members have been under in this exceptional year: they have helped deliver the economic response to the pandemic to the suffering effects of the pandemic on their own firms.’

So, while we would encourage you to get your tax return information to us as soon as possible and to meet the deadline if we can, there is no need to panic if there is a delay this year.