U.K. tax professionals welcomed a temporary waiver of late-filing and payment penalties under income tax self-assessment but stressed that interest will be charged on tax paid after the January 31 deadline.
“We recognize the pressure faced this year by self-assessment taxpayers,” Chancellor of the Exchequer Rishi Sunak tweeted on January 6. “These penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.”
The penalty waivers will give taxpayers extra time to complete their 2020-2021 tax returns and pay any tax due, HMRC said in a release. “Interest will be payable from 1 February, as usual, so it is still better to pay on time, if possible,” it added.
HMRC said 6.5 million of the estimated 12.2 million taxpayers who need to file a return have done so. While the filing and payment deadline is unchanged, the waivers will mean that anyone who cannot file their return by the January 31 deadline will not receive a late-filing penalty if they file online by February 28. Anyone who cannot pay the tax by the January 31 deadline “will not receive a late payment penalty” if they pay the tax in full or set up a time to pay arrangement by April 1, HMRC added.
HMRC reminded taxpayers that they need to disclose grants from the coronavirus support schemes and warned that it is seeing “high numbers of fraudsters emailing, calling, or texting people claiming to be from the department.”
Taxpayers need to be aware "that this is a concession on penalties and not a change to the deadline — the 31 January deadline remains in place," said Victoria Todd, head of the Low Incomes Tax Reform Group. "There could be other consequences for taxpayers of taking advantage of the announcement and putting off dealing with their taxes until February. We recommend that taxpayers make every effort to meet the 31 January statutory deadline if possible. If necessary, taxpayers should consider using provisional or estimated figures," she added.
“With everything that small business owners are up against at the moment, and with high rates of sickness, the extra breathing space will be much needed,” the Federation of Small Businesses said on Twitter.
Dawn Register, head of tax dispute resolution at BDO, said the announcement would be “a huge relief to those facing tax bills alongside other household debts” in January. “This additional time will provide taxpayers and advisers with crucial latitude, which is needed in these unprecedented times. Previously, taxpayers would have needed to rely on adhering to HMRC’s ‘reasonable excuse,’ which is open to interpretation — so this new certainty is very timely.”
“This will give valuable breathing room to many taxpayers and help them to avoid potentially damaging fines at a critical time — not only for them as individuals but for the U.K. economy as a whole,” said Adam Harper, director of professional standards and policy at the Association of Accounting Technicians.
The announcement showed that HMRC has “listened and acted on the concerns of our tax adviser members who report increased pressures on their workloads and significant staff absences because of the impact of the COVID pandemic, particularly the omicron variant, which is widespread during the peak filing period,” said John Cullinane, director of public policy at the Chartered Institute of Taxation.
HMRC said it has acted “because tax advisers and accountants are at the forefront of advice for affected taxpayers but are dealing or likely to deal with staff absences in January because of the pandemic,” the CIOT said.
Cullinane called for “the situation to remain under constant review,” adding that it may be appropriate to introduce further easements, “such as extending the time limits for appealing any penalties which are levied and allowing tax advisers to make ‘bulk’ appeals on behalf of their clients.”
Separately, HMRC has updated its toolkit for tax agents completing returns for clients who have property rental income.
The Statutory Sick Pay (Coronavirus) (Funding of Employers’ Liabilities) Regulations 2022, published on January 6, provide for some small and medium-size employers to reclaim from HMRC some or all of their statutory sick pay costs in cases in which incapacity for work is related to the coronavirus. A corresponding provision is made for Northern Ireland. Sunak announced the reintroduction of the rebate scheme on December 21, 2021.