You are legally obliged to declare your earnings and submit a completed tax return every year if you run your own business and, if you are a PAYE employee that has received a tax return request from Her Majesty’s Revenue & Customs, you are under the same legal obligation, though you are perfectly entitled to request it be withdrawn.
For those who still fill out a paper self-assessment income tax form, the deadline was October 31st 2017 and for those who submit theirs online, the cut-off date was January 31st. Either way, these deadlines have been and gone, so if you have failed to meet them, do you know what the consequences are?
A failure to return your self-assessment form on time does, unfortunately, come accompanied by some costly implications.
Firstly, there are the penalties for late submission. An unavoidable, instant penalty of £100 is incurred on the 1st February, for any late filing of tax returns. If three months go by without a submission, you will be levied an additional daily penalty of £10 per day, every day, up to a maximum of £900. At six months, an absent tax return incurs a further penalty of £300 and at twelve months, yet another £300 will be charged.
Secondly, there are penalties for not paying your tax. If your payment is late by thirty days, a charge of 5% of the due tax is added. Another 5% of that sum is payable after six months of non-payment and yet another 5% after twelve months.
Thirdly, there are the interest charges.
The costs really do begin to mount up so it’s no wonder people quickly find themselves in a position where they feel they can’t pay their tax. If this describes your situation, we’ve outlined some steps below that we would advise you to take:
- Submit your return – First and foremost, complete and return your self-assessment form as soon as you can to find out how much you actually owe. This at least will stop any further late submission fees from being incurred.
- Contact the HMRC and discuss your position - They will assess your situation and explain your options. You can ask them to outline a repayment plan but if this doesn’t seem affordable, bear in mind that it’s not your only option.
- Consider an IVA - If the HMRC’s repayment plan doesn’t seem manageable, talk to us about an Individual Voluntary Arrangement. The repayments may be a stretch, but you may find you can pay them without losing your home or business.
- If none of the repayment plans offered look realistic, filing for bankruptcy could be your only option. However, don’t declare bankruptcy without discussing it with an insolvency practitioner like McAlister & Co. first. We can help.
The issues that arise with the HMRC from failing to submit your tax return, can only be resolved by addressing them head on. Whether the solution you reach is to pay your tax bill in full, by an agreed repayment plan or by taking more drastic action, all have far better outcomes than ignoring the problem which at best, will result in a hefty debt and at worst, a prison sentence.