MAYDAY! MAYDAY! Tax return penalty warning!

/ 20 April 2013

David Whiscombe

We suppose everyone knows that the international distress call is derived from the French imprecation “M’aidez!” (help me!). But we hope that this isn’t a call which will be echoing around the ether next week. For why? Because 1 May is the next important deadline date for personal tax returns for the tax year 2011/12. They should have been filed already, by 31 January: and if they weren’t, an automatic penalty of £100 will be charged (even if there is no tax due). And if the return remains outstanding after the end of April, the penalty goes up to £10 a day, for up to 90 days. Get those returns in!

A few other points on penalties are worth noting at this time:

  • For a partnership return, the statutory penalties are payable “per partner”. So a 20-partner firm which hasn’t filed its 2011/12 return has already incurred an automatic penalty of £2,000 and penalties will from 1 May be running at £200 per day.
  • Penalties are due even where no tax is due, and even where the issue of the return was inappropriate: HMRC have at present no power to “unissue” a tax return even where the issue was in error. This can present difficulties where a return has been demanded from a non-resident with no UK income or gains who may not even understand English (a situation we have encountered). In such a case there may be grounds for exploring whether the issue of the return may have been ultra vires – although a strict reading of the law appears to give HMRC the right to issue a tax return to every man woman and child on the planet and to demand penalties for non-compliance, it is necessary to read into the law some implied territorial limitation!
  • There is a new penalty which bites for the first time this year where a taxpayer deliberately fails to file a return in order to keep HMRC in the dark for as long as possible about a potential tax liability. This can apply only where the tax return is more than a year late; but the penalty can in some circumstances be as much as 200% of the tax at stake. The first year for which this applies is 2010/11 so 31 January 2013 has been the first possible trigger date. If you are in this position, urgent action to remedy the problem is likely to be in order.

For more on any of these points please … — … to -… -.- .-.. – .- -..- (or use more modern methods to contact us).

David Whiscombe


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