SELF-ASSESSMENT - 25.01.2022

Clarifying the position for late filers

Following HMRC’s decision to offer a one-month reprieve for late tax returns this year, it’s likely that you will have at least some client returns to file in February 2022. What’s the position for late filing in respect of penalties?

Relief. In the run up to the filing deadline for the 2019/20 tax returns, HMRC was adamant that, despite calls from the professional bodies, there would be no extension, before relenting with just days to go. Understandably, there was widespread relief this time around when HMRC seized the initiative early, and announced (in early January 2022) that there would be no penalty charged for late filing , as long as the return is filed by 28 February 2022. Some clients may see this as an extra month to get things sorted, but it’s more complicated than that.

Filing. Firstly, impress on clients that the filing deadline itself has not moved, the reprieve is a penalty waiver. A return filed in February will still be recorded as late. This can cause issues with Class 2 NI collection (and associated credit), but will also extend the potential enquiry window for the return to 30 April 2023, instead of the usual twelve-month anniversary.

Payment. The penalty reprieve also extends to late payment of tax due, as long as:

payment is made by 1 April 2022; or
a payment arrangement is agreed with HMRC before that date.

Pro advice. Of course, there are no late filing penalties in respect of payments on account, but interest will still apply.

Interest. Although late payment of the self-assessment liability will not attract any penalty (subject to the above points), it is important to remind clients that interest will apply from 1 February as normal.

As the penalty interest rate is based on the Bank of England base rate, plus 2.5%, the rate of 2.75% will now apply.

Pro advice. Given the current level of inflation, it’s possible that there will be further increases to the base rate in 2022, and this should be kept in mind when budgeting and making the agreements.

There will be no automatic late filing penalty if the return is filed by 28 February 2022, but filing on time should be encouraged where possible, as a late return can affect other things, such as the enquiry window.