Self Assessment (SA) tax returns are issued by HM Revenue & Customs (HMRC) to people who are self employed, either on their own or in a partnership, to directors of companies and to those people who have more complicated tax affairs. This latter group can include high net worth individuals, people with a large number of income sources from the UK and overseas, as well as pensioners who may have substantial savings and investments.
Certainly HMRC would expect to receive a tax return from you, if in the last year, you:
- Were self employed
- Were a company director, unless that role was for a non-profit organisation
- Had an income in excess of £100,000
- Had an income in excess of £50,000 and either you or your partner received Child Benefit
- Had savings or investment income in excess of £10,000 before tax
- Had untaxed income in excess of £2,500, perhaps from rent or other investments
- Had taxable income from abroad
- Lived abroad and had an income from the UK
- Made a profit selling property, shares or other assets which were liable to Capital Gains Tax
- Had work expenses in excess of £2,500.
HMRC has an online checker for people to find out whether they are required to complete a tax return. The checker can be accessed via this link http://abytx.co/doineedto
If a tax return is not issued, there is still an annual obligation to notify HMRC within 6 months of the end of the tax year in which the chargeability to tax arose i.e. by 5 October.
Chargeability usually arises when there has been a change in circumstances, which could include the commencement of a new business, sale proceeds from the disposal of a capital asset giving rise to Capital Gains Tax, the acquisition of a buy to let property or even if an individual simply becomes liable at a higher rate of tax and has savings.
It is important to remember to let HMRC know of any such changes because there are financial penalties for a failure to notify HMRC. The HMRC guidance on failure to notify penalties can be accessed via this link http://abytx.co/failuretonotify
To register for self assessment as a self employed person, follow this link http://abytx.co/yesineedto
To register for self assessment because you need to complete a tax return, follow this link http://abytx.co/yesineedtoo
If you receive a tax return from HMRC as part of the bulk issue in April and intend to send it back in a paper format, then it must reach HMRC by midnight on 31 October.
If you receive a tax return from HMRC as part of the bulk issue in April and intend to file it online, then it must reach HMRC by midnight on 31 January.
If HMRC write and ask you to complete a tax return after 31 July, the deadline moves to three months from the date of issue of the tax return.
There is also the lesser known filing deadline of 30 December, if you want HMRC to collect any tax owed through your tax code. Currently you can ask for this if you owe less than £3,000 and have sufficient PAYE income to code out and collect the debt.
Late filing penalties
|Length of delay||Penalty you will have to pay|
|1 day late||A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.|
|3 months late||£10 for each following day – up to a 90 day maximum of £900. This is as well as the fixed penalty of £100 above.|
|6 months late||£300 or 5% of the tax due, whichever is the higher. This is in addition to the penalties above.|
|12 months late||£300 or 5% of the tax due, whichever is the higher.In particularly serious cases, HMRC may charge a ‘behavioural’ penalty after 12 months instead. The percentage of the tax liability used to calculate the penalty can be increased to 70% where by failing to make the return, a person deliberately withholds information that would enable HMRC to assess their correct tax liability. The percentage can be increased further to 100% if the withholding of the information is deliberate and concealed.|
HMRC has an online facility for people to calculate what their penalties may be, which can be accessed via this link http://abytx.co/penchecker
Right of appeal
A notice of assessment will be issued by HMRC to collect the late filing penalty.
However, there is a right of appeal. An appeal must be made within 30 days of the date on which the notice of assessment of the penalty is issued. There is no obligation to pay the penalty before an appeal against the assessment of the penalty has been determined.
A liability to a penalty for failing to file a tax return does not arise where the taxpayer satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse for the failure.
HMRC is currently consulting on the future of penalties and is considering changing the regime to reflect, for example, the past compliance of a person or their particular circumstances. Should someone who has always filed on time in the past be fined for their first offence? Should someone new to self assessment automatically receive a fine for the late submission of their first tax return?
The consultation closes on 11 May 2015 and revisions to the penalty regime appear to be in the pipeline, especially as HMRC moves towards a more personalised digital service.
Author: Guy Smith, Tax Investigations Manager on the ReSource Tax and VAT Consultancy Team.