Penalties Waived for Businesses Missing Tax Deadline

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Penalties Waived for Businesses Missing Tax Deadline

Late filing and late payment penalties will be waived for one month for self-assessment taxpayers. 

HMRC is waiving late filing and late payment penalties for a month for businesses that have missed the self-assessment tax deadline of 31st January.

This will present owners of small businesses and self-employed workers, who have all been affected by COVID-19, with extra time, should they need it, to complete and pay their 2020-21 tax return.

In a normal year, late submission of a tax return would result in a £100 fee, with further penalties if the delay is over three months.

HMRC has revealed that so far only 6.5 million taxpayers out of 12.2 million, who need to submit their tax return by 31st January, have done so.

The deadline for filing and paying tax is still 31st January 2022.

The penalty waivers mean that:

  • Anyone who cannot meet the  January deadline will not receive a late filing penalty, if they file online by 28th February.
  • Anyone who cannot pay their self-assessment tax by the 31st January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1st April.

Time to Pay means that there is the option to spread tax payments over time. Self-assessment taxpayers, who have up to £30,000 of tax debt can opt to do this online, as soon as they have filed their return.

Late-paid amounts, if not paid by 1st April, will attract daily interest at 2.75 per cent and a 5 per cent surcharge.

Angela MacDonald, HMRC’s deputy chief executive, has commented: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19. Our decision to waive penalties for one month for self-assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”

The 2020 to 2021 tax return covers earnings and payments during the pandemic. Businesses will need to declare if they received any grants from the COVID-19 support scheme up to 5th April 2021 on their Self-Assessment, as these are taxable, including:

  • Self-Employment Income Support Scheme
  • Coronavirus Job Retention Scheme
  • Other Covid-19 grants and support payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme

Emily Coltman, chief accountant at accounting software firm FreeAgent, said: “Self assessment season is always a fairly stressful time for freelancers and small business owners, so the news that fines for late filing will be waived in January will be a relief for many people. For those who have been recently impacted by Omicron, in particular, it will certainly be positive to have a bit of breathing space to help get their Self-Assessment returns completed.”

“However, it’s important not to be complacent about this news. Just because the Government is choosing not to implement fines in January, this should not be taken as carte blanche to put off doing your tax return until February – as you will still face the same scramble to complete it at the last minute. Plus, although HMRC are also postponing the late payment penalty for tax till 1 April, they will still charge interest on any tax paid after 31 January.”

Kevin Sefton, from sole trader tax app untied said: “The current Covid wave will be affecting not just those who need to file, but accountants and others supporting the 51 per cent of filers who use an adviser and HMRC themselves.”

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