Self-Assessment Tax Returns & Covid-19 – What you need to know

HMRC has been urged to consider extending the 31 January self-assessment filing deadline and/or late penalty regime in view of the current coronavirus pandemic however, they have recently confirmed that they do not currently plan to extend the deadline or waive late filing penalties for late filing.  However taxpayers will not have to pay the late filing penalty if they cannot file on time because of the impact of the pandemic.  HMRC will accept that there is a reasonable excuse if the delay occurs because of personal or business related disruption directly related to the pandemic.  In addition, they may accept pandemic-related delay on the part of the agent as a reasonable excuse as well.

Penalties for filing after the deadline will be automatically generated so a formal appeal will still need to be made.  In view of this HMRC will be extending the penalty appeal period from thirty days to three months.  This does however continue to provide an added compliance burden and may incur additional costs. 

Where ever possible, you should try to ensure that your self-assessment tax return is filed on time and the tax liability paid.  For those individuals who deferred their July payment on account, this will also be payable on or before 31 January 2021.  The first payment on account for 2020/21 also falls due on this date.  Consideration should therefore be given as to whether the payment on account could be reduced if your income and profits have been hit by the pandemic and are likely to be lower than for the 2019/20 tax year.  However, don’t forget that any coronavirus support payments received will form part of taxable income and needs to be included in any estimate of profits.

The continuing difficulties that many people are facing in light of the unprecedented situation we find ourselves in, means that funding the tax payment may be difficult for some.  HMRC has acknowledged that some individuals and businesses may need additional help and in September they announced further measures of support.

Where you cannot pay your liability in full by 31 January you may be able to pay by instalments.  HMRC have an online tool which can be used to set up a short term instalment plan for debts up to £30,000, so provided all the criteria is met, there is no need to contact HMRC directly.  It should be noted that late payment penalties will apply where tax remains unpaid unless a Time to Pay arrangement has been entered into before they become due, and you must continue to pay all the tax under the arrangement on time.  Interest remains payable for payments after 31 January at HMRCs official rate of interest of 2.6%. 

The online tool can only be used when the 2019/20 return has been submitted and the tax quantified and must be set up within 60 days of the original payment date.  For instalment plans over a period of more than 12 months, formal agreement will still be needed and this can be discussed via the coronavirus helpline on 0800 024 1222. 

It is possible that HMRCs stance may still change however for now, you should continue on the basis that the deadline remains the end of this month.  For help completing your 2019/20 return or setting up a Time to Pay arrangement contact one of the team at Wells.