How can I avoid paying a penalty on my tax return?

5th July 2018 by Nick Strawson

It has been said “do not put off until tomorrow what you can do today”. I would add “because if you enjoy it today you can do it again tomorrow!” While there may be many things about which this is true I doubt that it applies to the completion of the annual Tax Return. This task will normally await a rainy day or a cold dark autumnal evening. Be that as it may there are incentives for getting the information ready before 31st January, the main one being an initial  £100 fine for late submission. This is higher for partnerships as the fine is for the partnership return is £100 per partner in addition to the fines for the late-completion of the individual Returns.

I'm sure that all practitioners have clients (the same ones each year!) who push this to the very limit. In my case Tax Return information for a particular client was provided in the last week of January. I toiled manfully on to complete the Returns and as in previous years they were ready by the afternoon of 31st of January. The client took the forms away and was encouraged to arrange for these to be signed , letting me know  once this had been done. I waited for confirmation, checking religiously every half hour. Despite emails and ‘phone calls I received no confirmation  and at midnight I wended my weary way to bed, thinking that my 100% record of submissions success had come to an end. 

At work next morning I received the confirmation that the  Return declarations were signed the previous evening and I submitted the returns that instant. To my surprise no fine was issued and speaking to a colleague it was explained that in the days of paper returns HMRC would consider anything on the doormat when the post was opened to have been submitted the previous day, and this concession has continued. This in theory accounts for why no penalty was issued but is not something that should be counted on! Having safely negotiated that potential disaster I was therefore disappointed some time later to see in the post a penalty notice of 5% of the tax due to non-payment. This fine was significantly more than £100!!. The  client had failed to pay within 30 days, explaining that no tax had been demanded on his personal tax account. For some reason HMRC had delayed processing return. Unfortunately the fine is backdated to the due date of payment regardless of when the Tax Return is processed.

I sincerely hope that the tax is not still not still outstanding at the end of July, as there will be a further penalty of 5% of the tax, and this is in addition to the daily interest of 3% APR running on the outstanding amount.

For those who are even more dilatory in filing their Returns, further fines await including the possibility of incurring penalties of £10 per day for up to 90 days and incurring multiple fines of 5% of tax due or £300 (whichever is greater). Hopefully we will not  need to get involved in those extremes!

The Revenue also have a host of other penalties for sins of omission (e.g. failure to return a source of income) or commission (e.g. claiming for non-existent expenses). These fines vary depending on the nature of the error and whether you informed HMRC or they discovered it themselves.

The fines are as follows: -

If you informed the Revenue

  % of tax due 
 Reasonable care taken No penalty
 Careless 0% to 30% 
 Deliberate 20% to 70%
 Deliberate and concealed      30% to 100%


If HMRC discover the error

  % of tax due 
 Reasonable care taken No penalty
 Careless 15% to 30%
 Deliberate 35% to 70%
 Deliberate and concealed      50% to 100%


This is by no means an exhaustive list and further penalties may apply in certain circumstances, for example if offshore funds are involved.

Penalties can be saved, as so ably demonstrated  by Jordan Pickford, so do make sure that your information is submitted in timely fashion.  While Lionel Messi may occasionally miss a penalty, unfortunately H M Revenue and customs are unlikely to do so.

For more information please contact Nick Strawson.



Nick Strawson

Nick Strawson

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