Already know you’ll miss Tuesday’s tax deadline? Proceed at your peril

For whatever reason, life can get in the way. And with ‘taxes’ being one of life’s only two certainties, it’s likely that reading this right now, some contractors will know that they simply won’t be able to file their return or pay HMRC before the self-assessment deadline of Tuesday January 31st.

Head in the sand is for the birds

When working for yourself, such as through a limited company, the number one piece of advice we give to all our contractor clients is NOT to avoid the problem, writes Christian Hickmott, managing director of contractor accountancy firm Integro Accounting.

Granted, it’s not advice that people will be surprised to hear, but it means either coming to us (or whoever your tax adviser is), or HM Revenue & Customs. As soon as you have questions, or issues, go forward to either. We’d say that despite some ongoing challenges for the Revenue, someone there should be able to help -- and a similar someone will be at your contractor accountancy firm too.

Dire circumstances = reasonable excuse

If you’re one of the ‘I’m not going to make the 31st’ crowd, it might be because you genuinely find yourself in dire circumstances. If so, you can appeal any penalties you are issued (the first penalty is £100 and hits as soon as you miss the deadline), on the basis that you have a ‘reasonable excuse.’ And reasonable excuses include short-term and long-term illness, bereavement within the family, issues with mental wellbeing, fire, flood, and theft.

Unfortunately, in this situation, the penalties will still accrue until your tax return is filed. You, the individual taxpayer, would then appeal HMRC’s decision and once reviewed, should the ‘reasonable excuse’ be seen as legitimate, a refund will be issued. An appeal based on a ‘reasonable excuse’ will not be taken lightly however, so we recommend reading the full guidance from the tax office which can be found here.

'Missing information'? The taxpayer's 'dog ate my homework' excuse

Be aware, if you try to argue that there was ‘missing information,’ it is highly unlikely that it will be classed by HMRC as a ‘reasonable excuse.’ The Revenue’s reasoning here is that information can always be obtained in some shape or form, for example PAYE, P11D information, child benefit details and student loans. All those and their details are obtainable by you phoning HMRC direct.

Before getting on the phone, ensure that your bookkeeping is as up-to-date as possible and should you still eventually need to provide estimates for certain records, ensure you have a justifiable information and description for the estimate.

Don't submit if you fancy penalties and stress

If you are reading this and leaning towards NOT sending in your tax return by January 31st because you cannot afford the amount of tax which you owe, please be aware that not submitting it will only see you incur extra HMRC penalties and, we’d wager, more stress. In this situation, you’d be much better off submitting your tax return and then contacting HMRC to set up a payment plan. Our recommendation is to always file your self-assessment tax return on time, as this not only helps mitigate late-filing penalties but also, HMRC views the fact that you filed in a better light (than had you not filed) when setting up payment plans. A bit like we were saying at the top, the ‘bury your head in the sand’ approach is ill-advised.

For those contractor-directors who simply miss the deadline with no ‘reasonable excuse’ – including those who simply forget about filing before Tuesday, you will sadly incur charges. And those charges continue until the issue is resolved.

HMRC penalties and late fees: overview

One day late?

Being just one day late will see you incur an immediate penalty of £100.

Over 3 months late?

Then, there is a 90-day period whereby if your tax return is not received, you will be charged £10 per day.

Over 6 months late?

After six months the penalties depend on the amount of tax that is due but start at £300 each for being 6 and 12 months late for filing. On top of that, there would be additional 5% surcharges for late payment after 6 and 12 months. Furthermore, if you do not pay your taxes before February 28th, there will again be an additional 5% surcharge added.

Clock is ticking...

To minimise the prospect of these potentially significant charges rearing their ugly head, keep good clean records, be aware of your tax deadline dates and seek professional advice, or contact HMRC. Do the latter two – speedily now -- if you have tax concerns, or your circumstances haven’t been covered in the above, but you are covered by the deadline in just three working days’ time. Good luck!