HMRC delays imposing late payment penalties for 2020/21 Self Assessment Tax Returns

On 6th January 2022, HMRC announced that that there will be an extended period of time where no late penalty charges will be applied if filing your taxes online is done by 28th February 2022, or for those who pay their tax in full or payment plan is done by 1st April 2022.

This will operate in the same manner as last year, providing customers and their representatives additional time to file and is a result of the Omicron variant of Covid-19 which continues to cause high staff shortages, including within accounting sectors.

The aim of the waiver is to help thousands of self-employed avoid being unfairly punished with late penalty fees, because their accountant was being unable to file their documents in time due to covid related illness.

A huge 1.8 million missed the tax deadline last year due to the pandemic crisis, so this announcement comes as no surprise in efforts to avoid another logistical failure.

HMRC is of course still encouraging customers to still file and pay on time as and where they can, and simply only use the extensions where necessary.

HMRC has also reminded its customers that their ‘Time to Pay’ options are still available as normal, allowing a spread payment plan for Self-Assessment bills of up to £30,000 over a maximum of 12 monthly instalments.

If more than £30,000 is owed to HMRC, a bespoke payment plan will need to be arranged with HMRC directly over the telephone and may mean being able to demonstrate reasonable excuse of the customers financial hardship.

Customers will not incur the usual 5% late payment penalty charge on unpaid tax that is still outstanding on 3rd March 2022.

Instead, the 5% late payment penalty can be avoided if customers pay their tax or set up their payment plans by midnight on 1st April 2022.

It is important to note that this announcement is only relative to the first penalty.

There is no information from HMRC that supports the idea that a second 5% late payment penalty will be delayed. This is usually charged to tax that goes unpaid for 6 months after the due date.

However, it is important to note that there are no changes to filing or payment deadlines.

This means that the following still applies:

• Interest will still be charged on late payments (From 4th January 2022, the late payment interest rate is 2.75%)
• SA700’s and SA970’s received by HMRC in February will not incur late filing penalties
• A return received online in February will be treated s a return received late meaning that there will be an extended enquiry window and that the 5% penalty charge will apply if still outstanding by midnight on 1st April (if no payment plan is in place)
• HMRC will not charge a late filing penalty on SA800’s and SA900’s if customers have filed online by the end of February
• Customers that file late via paper will be charged the penalty as normal (this can be appealed by the customer if they hold reasonable excuse for late filing their papers)

Customers who are self-employed and usually claim certain contributory benefits must ensure that their annual Class 2 National Insurance Contributions have been paid on time, to avoid their claims being affected.

These benefit entitlements may be affected if the customer is not able to pay their balancing payment via Class 2 NIC’s by 31st January and has entered into a Time to Pay arrangement through installments.