Avoid Tax Late Filing Penalties With This Loophole

The filing deadline for UK self-assessment is ticking away – but it’s not too late to avoid a fine if your paperwork is not ready.

A work round exploited by accountants can easily stop HM Revenue and Customs (HMRC) charging a £100 automatic penalty and give late filers some breathing space to finalise their figures.

Tax rules clearly state that the automatic fine is due for any tax return not filed by midnight on January 31.

That’s even if the tax payer has nothing to pay, so is effectively filing a zero return.

But the rules do allow a taxpayer to file a self-assessment return and then adjust the figures if they are not correct.

Although HMRC frowns on incomplete filings because they want as much income tax and capital gains tax paid as soon as possible, the law says the procedure is allowed.

Automatic £100 fine

So, accountants will file the figures they have by the end of January and make a payment of tax due based on the workings.

This stops the £100 automatic self-assessment fine and stops any interest accruing on tax owed.

Then, they file an adjusted return with the final figures before the end of February, because HMRC imposes an automatic 5% fine on any unpaid tax on this date.

HMRC does not publicise this ruse in the media bandwagon reminding people to file their tax returns by the end of January.

Last year, 890,000 taxpayers filed late and received the £100 fine.

Around 10 million taxpayers must file a return each year and around half do not get around to the job until the last few weeks approaching the deadline.

Excuses for missing the deadline

HMRC does report a few hundred taxpayers even sit at their computers for an online filing on Christmas Day and New Year’s Eve.

Do not forget that any tax owed is also due by the midnight January 31 deadline.

“It is the payment deadline, not just the return deadline,” says Ruth Owen, director general of personal tax at HMRC.

HMRC will accept some ‘reasonable excuses’ for failing to hit the filing deadline.

These include a close bereavement, an unexpected hospital stay, broadband or computer failure, HMRC web site problems or personal disasters such as fire or floods.

Unreasonable excuses some taxpayers have tried include blaming dogs for eating their tax returns, losing the paperwork when a yacht sank and divorced spouses failing to hand over HMRC letters.


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