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MPs Present Support Plan as HMRC Announces Penalty Concession

Posted on Jan. 26, 2021

U.K. lawmakers proposed targeted grants to fill gaps in coronavirus support schemes, while HM Revenue & Customs announced that late-filing penalties will not be charged for 2019-2020 tax returns filed by February 28.

The Gaps in Support All-Party Parliamentary Group (APPG) presented a plan to HM Treasury to help an estimated 2.9 million taxpayers excluded from the coronavirus support schemes administered by HMRC, it said in a January 25 release.

The targeted income grant scheme, devised by tax specialist Rebecca Seeley Harris of Re: Legal Consulting Ltd., includes the directors’ income support scheme that Seeley Harris drafted and presented to Treasury in November 2020 in partnership with the Federation of Small Businesses, the ForgottenLtd campaign, and the Association of Chartered Certified Accountants.

The APPG, which claims to represent more than 260 members of Parliament, proposes one-off, targeted grants to “help protect the entrepreneurs that Britain desperately needs to rebuild its battered economy.”

The targeted income grant scheme would be easy to administer and would offer long-term economic benefits, the APPG said. Directors would be eligible for support under the directors’ income support scheme or a one-off grant of £7,500. The newly self-employed, “Pay As You Earn freelancers,” and self-employed people excluded from the self-employment income support scheme (SEISS) because of the 50-50 rule, would qualify for the fourth SEISS grant or a one-off grant of between £3,500 and £7,500.

“The government’s COVID-19 financial support package has been generous and set up at speed. The coronavirus jobs retention scheme and the [SEISS] have provided support for millions of employees and the self-employed,” Seeley Harris said. “However, a number of individuals and businesses have fallen through the cracks of support and faced many months of financial hardship. Small businesses, sole traders, and entrepreneurs will be the engine of the U.K.’s economic recovery in the months and years ahead. But, if we do not support them now, many face ruin.”

“Crucially, failure to offer this support for people who have paid their fair share into our tax system is likely to result in a far higher long-term cost to the Treasury, both in terms of business opportunities lost and in increased costs from unemployment,” Liberal Democrat MP and APPG Chair Jamie Stone said. “Failing to act now would be a shortsighted mistake that would haunt our economic recovery. We would pay a much higher price later.”

Feedback from members of leading professional bodies on the impact on people’s lives of continued exclusion from support schemes reflects the gravity of case studies shared by campaign groups, the House of Commons Treasury Committee heard on January 20.

Late-Filing Penalties Concession

Anyone who cannot file their tax return by the January 31 deadline will not receive a £100 penalty if they file online by February 28, HMRC said in a January 25 release.

Taxpayers will still need to pay their self-assessment tax bill by the January 31 due date to avoid interest being charged. Those who cannot afford to pay by January 31 may be able to pay in monthly installments, but would need to file the return before setting up the arrangement, HMRC said. It had become “increasingly clear from the filing rate that some taxpayers and agents” would be unable to file on time, it added.

“We want to encourage as many people as possible to file their return on time, so we can calculate their tax bill and help them if they can’t pay it straight away. But we recognize the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by January 31,” HMRC Chief Executive Jim Harra said.

“Not charging late-filing penalties for late online tax returns submitted in February will give them the breathing space they need to complete and file their returns, without worrying about receiving a penalty. We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic,” Harra added.

‘Change of Heart’

“While HMRC had always said that taxpayers issued with late-filing penalties would have their penalties quashed where they had been unable to file on time due to coronavirus, appealing penalties would have meant more work for agents, taxpayers, and HMRC,” the Chartered Institute of Taxation said.

“We welcome HMRC’s change of heart as it takes some of the pressure off taxpayers, their agents, and HMRC at this difficult time. However, it is still important to file on time if possible and taxpayers should ensure their agent has all the required information to file the return promptly and pay the tax due,” said Jon Stride, co-chair of the technical steering group at the Association of Taxation Technicians.

“Although we asked for a later date, we are happy that HMRC has recognized the need for some breathing space and allowed some extra time before issuing penalties. We would ask that they keep the situation under review,” said Glenn Collins, head of technical advisory and policy at the Association of Chartered Certified Accountants.

“During a time of unprecedented challenge, this decision will help millions of taxpayers and also relieves some of the pressure on an incredibly busy accountancy sector who are doing their utmost to support individual taxpayers and businesses,” said Phil Hall, head of public affairs at the Association of Accounting Technicians.

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