You may have thought the most challenging part of the year has been and gone, many fear January as the longest and most bleak month financially, but there’s one matter that many may not have considered.
Friday 31st January was the tax deadline for self-assessment. According to reports from HMRC, almost a million (958,296) have missed this. However, according to Erica Manderfield, a Tax Partner at Streets Chartered Accountants, all is not lost, but you should start thinking about it now, rather than later.
For construction firms, tax is one of those certainties every year, and along with the stress of managing builds and complex staffing needs. Couple this with challenging market conditions and this can mean that tax concerns can sometimes take a backseat.
This year’s tax deadline was such a panic for some that they filed their self-assessment returns on Christmas Day itself. Recent stats from HMRC have been released that show many used the festive break to crack on with their own tax matters.
An incredible 245 taxpayers paid their returns between 12 noon and 1 pm on Christmas Day, meaning while many were enjoying their festive lunch, others were thinking of that yearly deadline of January 31st.
Now that I’m late, what should I do?
The first thing to do is not panic. If you’ve never submitted a tax return before or if you have an inkling you need to, you’ll need to complete one if you fit certain criteria.
Self-assessment is needed whenever tax due has not been deducted from wages, pensions and savings income, or when people or businesses have earned additional untaxed income.
For example, a tax return needs to be completed where:
- More than £2,500 from renting out property is earned
- You or your partner have received Child Benefit, and either had an annual income of more than £50,000
- More than £2,500 in other untaxed income is earned, for example in commissions or tips
- You are self-employed as a sole trader
- Where you have an annual income of more than £100,000
- Earned income from abroad is received that you need to pay tax on
- In some cases where you have received trust income
While not exhaustive, the above list provides an insight into the number of taxpayers who need to file a self-assessment tax return.
If you fail to file your Self Assessment Tax Return by January 31st, there is potential interest and penalties that can occur, and these can be fairly onerous for all involved.
The most immediate penalty you can incur is an automatic fine of £100 for not submitting a tax return at all by the deadline. Further fines, penalties and interest will occur for those who fail to complete their return after 3, 6 and 12 months.
This is unless you contact the HMRC with a reasonable excuse, along the lines deemed to be acceptable by them and posted on their website. A reasonable and robust argument, as well as evidence, is needed if you are to stave off any fines in this situation. Such an approach is only likely to lead to an extension of time to complete your return. Avoiding it altogether is not an option.
What next?
Ideally, either piece together your return or enlist the help of an accountant to ensure you complete and file your return without delay.
If however, you miss the filing deadline, you will need to complete and submit the form without delay and include a full explanation to HMRC as to why it is late. To avoid further interest accruing and a 5% surcharge on any tax payable you will need to ensure that any tax due is paid before the February 28th 2020 at the very latest.
What if you continue to do nothing?
Not only will you incur the fixed penalty for not filing a return, but those who file after three months from the January 31st deadline will also be subject to a daily penalty of £10, up to a maximum of £900.
If you are six months late with your return and payment, you then face another financial penalty of £300 or 5% of the overall tax. If you are more than 12 months late, then you face a further fine of £300 or a further 5% charge of the overall tax liability. This is especially dangerous as there is no capping that applies to these penalties and interest will also be added for late payment.
Where can I turn for help?
If you have an accountant or a tax adviser, seek their advice in the first instance. You may find that paying for this may be cheaper than any fines you could face and at least it will hopefully feel better value for money. You may too, if you are perhaps a little tardy in dealing with your affairs, wish to consider taking out Tax Enquiry Fee Protection – a policy which will pay for professional fees that result from most types of HMRC enquiry or investigation.