As the tax return deadline approaches, there’s a cast-iron guarantee HMRC will be hearing some creative excuses for late submission. Last year alone, one business owner said she couldn’t concentrate because she saw a volcanic explosion on the news, while another apparently had an argument with his wife and went to Italy for five years. A third – my personal favourite – was late due to “a run-in with a cow”.
It’s probably fair to assume these events did not happen. They probably left it too late. They’re not alone; HMRC figures suggest that 870,000 taxpayers, or one in 13 business owners, failed to file their returns on time for 2014/15. But some of them, such as freelance content marketer Chelsea Haden, had a genuine nightmare.
“I moved house in November 2012 and requested a new Government Gateway ID and tax reference number, as they were lost in the move,” she says. “But in January, there was apparently no record of me contacting them. Instead, I was told to call my local tax office – and was put through to somebody who said there was no such thing.
“I sent some old paper forms along with a letter of reason for being late. But they then sent a letter to say I’d incurred a £100 penalty for late filing, which I contested three times. I heard nothing for a few months, as the fines clocked up to £600!”
Fortunately, Chelsea contested the fines again and again, and finally, HMRC accepted her appeal. But it was a long and stressful process, and one best avoided at all costs.
Making sure you’re on time
“Don’t panic,” says Darren Roberts, Head of Contractor Services at Dynamo Accounts. “The form isn’t overly complex and you should be able to complete it within an evening. It can also be completed in a few sittings, saving your progress as you go along, but for most people this won’t really be necessary.”
A spot of forward planning is essential to make sure the notorious tax return-eating dog stays out of your neighbourhood. Yes, that’s another one. You need to keep records of all the work-related transactions you make – your business sales and income, all your business expenses, the VAT you’ve paid and charged, the income you’ve paid yourself, and so on. An accountant can help you with this.
“It’s all about discipline,” Darren says. “Taking a few moments to keep up to date is a fantastic way to stay ahead of the curve and make sure you’re on time. Try uploading scans or photographs into a Dropbox folder so they’re in one place, which you can then share with your accountant.”
Making the process simpler
Matt Fryer, Senior Compliance Manager at Brookson Accounting, reckons it’s always easiest to use HMRC’s online tool. “Our best advice would be to keep as organised as possible,” he says. “HMRC will calculate your bill upon submission. You can submit your return at any time from the end of the tax year, so if you could do it from 7th April, why wait until 31st January?
“When you’re budgeting for your personal tax bill, don’t forget about payments on account. These are payments in advance of next year’s tax bill, which are due on 31st January and 31st July. They’re payable if your self-assessment tax bill is more than £1,000 and you haven’t already paid more than 80% of all the tax you owe at source.”
What happens if I miss the deadline?
The bad news is you will probably be fined. It can get expensive; if you’re 29 days late or fewer HMRC will fine you £100. If you’re between 30 days and three months late, it’s £10 for each day (on top of the initial £100), totalling £1,000 after the whole three months. Any later and the costs really do begin to rack up; HMRC’s online tool can help you calculate the amount owed if you find yourself in this position.
However, if you really do have a good reason – and it isn’t farmyard related – all is not lost. According to Ruth Owen, HMRC Director General of Personal Tax, they’re not all out to get us. “We understand that life can be unpredictable,” she says. “For those customers who have a genuine excuse for missing the 31st January deadline, help is on hand. My advice would be to contact us through our helplines or online as soon as possible.”
The bottom line
An accountant’s advice would be to get an accountant. They’d probably be right. Keeping track of the many hundreds, if not thousands, of transactions your business makes over a year is a colossal task. If you make a mistake, the penalties will almost certainly outweigh the cost of hiring a professional to take care of it for you.
Apart from that, just plan a little further in advance this year – and you won’t get stuck up a mountain in Wales, unable to find a postbox.