Search

New Year, Old Debts: The Delay In Tax Returns


The HMRC (HM Revenue and Customs) has retained the extended Self Assessment deadline of January 31st for another year as millions of individuals have not yet completed their return.


Last year, a record-breaking 1.8 million taxpayers failed to sort their taxes on time. As of January 24th this year, more than double that figure did not file their tax return and may face the risk of acquiring fines that could snowball into thousands if left unattended.

We can only theorise as to why this is happening.


The first prospect is that workers are merely taking advantage of the month’s grace on penalty charges: the HMRC’s decision to waive the £100 late payment penalty as long as people file their returns and pay by the end of February eases the pressure on those trying to complete the process. A sizeable portion of the taxpayers concerned are individuals who experienced the added complication of calculating payments on Covid-19 support grants.


Furthermore, we must note the urgent pleas for the extension heard at the beginning of the month from accountants reporting widespread staff shortages caused by the spread of Omicron. This makes it more difficult and in some cases impossible for professionals to meet the cut-off date, which could have led to many taxpayers having been unfairly punished for their accountant having been out of work due to illness.


However, whilst this would form an acceptable assumption, it is also important to consider the second, bleaker scenario: the late returns may be caused by an inability to pay the tax amid the cost of living rising at its fastest rate in years. According to the Office for National Statistics, inflation in the UK in December 2021 stood at 5.4%, a sign that consumers are facing considerably high prices including soaring energy bills. Considering the HMRC’s extension and their delay of the late payment penalty, Dawn Register, head of tax dispute resolution at the accountant BDO concluded that “this is a very welcome move by HMRC” and “will be a huge relief to those facing tax bills alongside other household debts in January,” claiming that receiving a ‘brown’ envelope in February would result in “unnecessary angst.”


It is estimated that 33% of people could miss the normal deadline to file a return, up from 26% last year. This year the “unnecessary angst” mentioned by Dawn Register may have been considerably better prevented, as in 2021 the extension was announced less than a week before the deadline. In addition to this, the HMRC has also said that those who cannot pay the tax they own by March 3rd will not be charged the normal 5% late payment penalty but have to set up a “time to pay” arrangement by April 1st. Comments made by Myrtle Lloyd, the HMRC director-general for customer services, exemplify the organisation’s awareness of the circumstances that may have led to this increased rate of delayed tax returns and how this may have influenced their decision to give individuals “extra time to meet their obligations.”


Whether the penalty waivers are enough to accommodate delays caused by the pandemic or are just in themselves delaying the dreaded brown envelope which may be posted to people following the 28th of February is something that we will have to wait and see.


When considering the two possible causes of the delay discussed above, it is also important to consider that one is the result of a temporary inability to physically complete the Self Assessment, whilst the other is the result of a year with soaring inflation that led to many struggling to afford the cost of living in Britain. Only one of these factors can be categorically solved by an extension to the deadline for filing the tax returns. Nonetheless, the HMRC’s attempt to react to the difficulties noticed is commendable and, hopefully, sufficient.

 

Written by Nicola Craciun

Research compiled by Joe Eastment

0 comments

Top Stories