Self Assessment (SA) taxpayers have to make payments on account twice a year to HMRC. The dates are fixed and they are 31 January in the year of assessment and 31 July after the year of assessment. A balancing payment may also be due.
Payment due dates and calculations are covered in this blog post
HM Revenue & Customs (HMRC) charges interest on any tax owed which is unpaid. Interest is also charged on any unpaid penalties until HMRC receives payment.
The current interest rate charged by HMRC can be viewed here http://abytx.co/1hD6Yp1
As well as charging interest for late payment, HMRC will also charge a penalty at various dates if tax remains outstanding.
|Length of delay||Penalty|
|30 days late||5% of the tax owed at that date.|
|6 months late||5% of the tax owed at that date. This is in addition to the 5% already charged after 30 days.|
|12 months late||5% of the tax owed at that date. This is in addition to the two 5% penalties already charged.|
The penalties do not apply to any payments on account that are paid late. They apply after the balancing payment becomes due which is the 31 January following the year of assessment.
Steve’s tax for the 2012/13 tax year is due on 31 January 2014. He has paid both of his payments on account on time, but he still owes some extra tax on 31 January 2014 because of some untaxed interest. HMRC does not receive the full payment until 5 August 2014.
It is over 6 months late, so the penalties are as follows:
- 5% of the tax unpaid at 2 March (30 days after the date the balancing payment was due)
- 5% of the tax unpaid at 2 August (6 months after the date the balancing payment was due)
Appealing against late payment penalties
You have the right of appeal against late payment penalties. Any such appeal must be made within 30 days of the date of the penalty notice, not the date you receive the notice. Either you or your accountant, if you have one, can make the appeal.
If you have received a penalty notice, there should be an appeal form enclosed. An online version can be accessed here http://abytx.co/1eW13Hk
A reason for making the appeal has to be given and explained. You may think you have a ‘reasonable excuse’ for paying your tax late. If so, you should write and tell HMRC about the reasonable excuse within 14 days of the problem ending and not simply wait for the penalty notice.
HMRC’s guidance of an acceptable reasonable excuse can be viewed here http://abytx.co/1jvEehd. It should be noted that what constitutes a reasonable excuse can be highly contentious with HMRC and professional expertise may be required to successfully argue your case. HMRC should judge each case on its own facts, so do not be put off making an appeal if you think you have a genuine reasonable excuse, even if it is not covered by HMRC’s guidance.
Author: Guy Smith, Senior Tax Consultant on the ReSource Tax and VAT Consultancy Team.
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- Reduced payments on account to HMRC – Day 5 of 25 days of tax tips (abbeytaxblog.co.uk)