Each year, around 10 million UK residents receive an SA100 form through the post, otherwise known as an annual tax return.
Under the current system (known as self-assessment), you are legally obliged to complete a tax reform if you receive one. This is the case even if you think it's not relevant to you and you don't owe the taxman a penny. Since the 2011/12 tax year, the only way out is to ask for an SA100 to be withdrawn by calling the taxman on 0845 900 0444.
What's more, the fines for not submitting your tax return and paying your tax bill on time are both automatic and steep. Hence, having an overdue SA100 can quickly turn into a bureaucratic and financial nightmare.
Paper tax returns must be filed by 31 October after the end of the previous tax year (on 5 April). File online and this deadline is extended to 31 January of the following year. Thus, if you received a 2012/13 tax return last spring, then this must be filed and any tax paid no later than 31 January 2014.
If you miss the paper filing date of 31 October or the online deadline of 31 January, then you are automatically fined £100. File three months late or more and an automatic daily penalty of £10 applies, up to a maximum of £900. File or pay more than six months late and a further fine applies: £300 or 5% of the tax owing, whichever is greater. File 12 months late and a similar fine applies.
In addition, you'll be charged interest on any unpaid tax overdue, plus an additional levy. This levy is 5% after 30 days, another 5% after six months and a further 5% after 12 months. Finally, persistent or long-standing offenders can be fined a penalty of up to 100% of the tax due, thus doubling their bill.
In summary, submit a tax return more than a year late and you could be hit by fines totalling £1,600 -- even if you owe no tax whatsoever.
An amnesty for late tax returns
What happens if you have several outstanding tax returns and are worried about filing them? After all, this could mean paying hundreds or even thousands of pounds in fines and interest. The good news is that HM Revenue & Customs (HMRC) has launched a brand-new initiative aimed at getting paperwork-shy Brits to file outstanding tax returns.
From this month until Tuesday, 15 October, HMRC is running a tax amnesty called My Tax Return Catch Up. This campaign allows taxpayers to bring their tax affairs up to date by submitting tax returns for any previous years up to 2011/12. By taking part, you will receive the best terms available for late payment from HMRC.
Here's how My Tax Return Catch Up (MTRCU) works:
- First, you must tell HMRC that you wish to join the campaign. You can do this by completing and returning this notification form or registering online by the 15 October deadline. Alternatively, you can call the dedicated MTRCU helpline on 0845 601 8818 (open Monday to Friday, 9am to 5pm).
- Next, you must complete and submit all your outstanding returns -- up to and including the 2011/12 tax year -- by the deadline. In most cases, the simplest way to do this is to file online.
- Lastly, you must pay any income tax and National Insurance contributions that you owe. If you're lucky, then you can reclaim any repayment due.
If you can't pay the full amount of tax due, then MTRCU advisers will help you to set up a payment plan to clear your arrears. To make this task easier, always quote your 10-character Unique Taxpayer Reference (UTR) in all correspondence with (and payments sent to) HMRC.
What's in it for you?
By taking advantage of this tax amnesty, HMRC states that you can bring your tax affairs up to date in a 'quick and straightforward way'. Also, you have use of a dedicated helpline for advice.
Most importantly, joining MTRCU 'increases your chances of saving a higher penalty based on behaviour'. In other words, it stops the rot and may prevent harsher treatment in future, up to and including court action.
In summary, think of this campaign as a juicy carrot before HMRC starts wielding a big stick. Therefore, if you think you would benefit from joining My Tax Return Catch Up, then I'd urge you to do so without delay.