Taxman won't be Mr Nice Guy in 2012

Hector certainly won’t come to your aid when the clock chimes midnight on 31st January! Now that you’ve registered to file your tax return online, when should you do it? You have till midnight on January 31st 2012, writes Emily Coltman ACA, chief accountant at FreeAgent, an online accounting provider to contractors.

The exception is if Her Majesty’s Revenue & Customs’ “Notice to Complete a Tax Return” letter did not reach you until after October 31st 2011. If that’s what happened in your case, then you have three months from the date you received the letter in which to file your tax return.

You also need to pay any tax and National Insurance that you owe by 31st January 2012.

What happens if I don’t file on time?

You’ll be fined and HMRC have upped the ante on penalties for late tax returns.

Until this year, they imposed a fixed penalty of £100 for filing your tax return late, but this was limited to the amount of tax and National Insurance you were paying. No tax bill = no fine.

HMRC have now effectively said “no more Mr Nice Guy”. If you’re late filing your tax return for the tax year ended 5th April 2011, you will be fined £100 – even if you had no tax to pay and even if you were due to receive a refund from HMRC.

And that’s not all. The later you file, the higher the penalties.

If your return is more than three months late, HMRC will charge you £10 for every day you’re late, up to a maximum of £900, as well as the fixed penalty of £100.

More than six months late and you’ll be fined an additional £300, or 5% of your tax bill, whichever is the higher.

More than 12 months late and there’s another £300 or 5% to pay. And HMRC say that “in serious cases” they may choose to fine you 100% of your tax bill instead – so effectively making you pay your tax twice. So it really is worth making sure you file on time!

What if I can’t file on time?

If you have what HMRC agree is a “reasonable excuse” for not filing your return on time, then they’ll cancel your penalty.

They don’t give a clear definition of “reasonable excuse”, but they do provide examples, including:

  • Loss of documents (e.g. in a fire, flood, or stolen) that you can’t replace in time
  • Life-threatening illness or injury suffered by the taxpayer which prevents you dealing with your tax affairs
  • Death of a partner just before the deadline
  • Long-term postal strike
  • Issues with HMRC’s online service that you can’t work around

Bear in mind, HMRC’s website does have a nasty habit of crashing towards the end of January when lots of people are all trying to file their tax returns at the same time, at the last-minute! So it’s best to avoid doing it then if you can.

Plus, you’ll need to write to your tax office if you think you have a “reasonable excuse” for filing late, and quote your name and Unique Tax Reference and explain why your return was late and when you sent it in.

If you couldn’t file your return because of errors with the online service, you also need to quote the error message the website gave you.

HMRC won’t accept this information if you phone it in.  You must write.

What about paying my tax late?

If you don’t pay your tax on time, sadly you will be fined some more!

If your tax and National Insurance payment that’s due on January 31st 2012 is more than 30 days late (i.e. if you pay after 1st March 2012) then HMRC will charge you a penalty of 5% of the tax you owed at that date.

There’s an additional 5% penalty if you pay more than six months late and yet another if you’re a year late.

And HMRC will also add interest to your original tax bill and to these penalties if you don’t pay them.

So make sure you save up enough to pay your tax and National Insurance on time – as well as filing your tax return on time – otherwise your 2012 could get off to a bad start by returning you two sets of penalties!

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