Self Assessment Penalties
The self-assessment system was introduced in 1996 and at present HM Revenue & Customs require about 10 million individuals to file returns each year.
The system is policed by penalties which until 5th April 2010, remained very much the same. Basically, a penalty of £100 was charged if a return was not filed on 31st January following the end of the tax year (31st October in the case of paper returns).
However, this penalty was limited to a maximum of one times the tax outstanding at 31st January. So in practice a person avoided a penalty when filing late if they ensured that their liability had been paid in full by 31st January. A second £100 penalty was charged if a return was still outstanding on the following 31st July.
In the case of persistent offenders, daily penalties can be applied when sanctioned by a Tax Tribunal.
Where tax was paid late, there was a 5% penalty applied to any amount outstanding one month after the due date and a second 5% penalty after a further six months.
Penalties for the year to 5th April 2011 and subsequently are changing. In particular, a penalty will be charged even if there is no tax outstanding. Penalties for late filing will be as follows:-
- £100 where the return is 1 day or more late; and
- £10 per day for up to 90 days where the return is filed more than 3 months late; and
- £300 or if greater, 5% of the tax due when the return is filed more than 6 months late; and
- a tax geared penalty of up to 100% of the tax due or £300 or if greater when the return is filed more than 12 months late.
There are new penalties too when tax is paid late. The existing 5% penalties at 1 month and 6 months remain, but there will be a third 5% penalty when tax is paid more than 12 months late.
Disclaimer
This document has been produced for general guidance only and does not constitute tax advice. Whilst every care has been taken in its preparation, Warr & Co will not accept liability for any loss incurred as a result of any use made of this document or its contents. We will be happy to offer specific advice to clients when requested. Should you have any queries or wish to discuss any of the points raised please contact Suresh Dhokia or Peter Edwards on 0161 477 6789.
Date of Article: 14th October 2011
