January is the month in the UK when those who have not already filed their 2012/13 Self-assessment Tax Returns must get on with doing so, before the online submission deadline of 31st January 2014. Failure to submit on time now attracts increasingly large penalties, even if you have no tax liability or, indeed, are entitled to a tax refund.
Excuses for being late with your Tax Return are usually rejected by HM Revenue & Customs (HMRC), who have become increasingly strict over recent years. Despite pleas for clemency, the Inspector of Taxes will not accept excuses related to missing moggies or rabid dogs (despite research showing that 2% of people still blame the pet dog for late filing or payment).
But we are not alone in the UK in having a strict Revenue Service, and history, ancient and modern, is replete with examples of strange taxes, often used to affect our collective behaviour. In Chicago, for example, whether or not you suffer the “candy tax” will depend on the amount of flour in the confectionery you purchase – not dissimilar in fact to a UK VAT case concerning whether Jaffa Cakes are cakes or biscuits. The beard tax in Russia was an attempt to make Russians more clean shaven and thus European, and the playing card tax – in force around much of the world at various times – was an attempt to tax gambling. Of course in Nevada, they have the opposite desire and reputedly give you a pack of playing cards each time you file your Tax Return….!
Applying “behavioural economics” to taxation can have unintended effects that really ought to have been foreseen. In various US States, the push to greener transport has caused such a decrease in revenue from gasoline taxation that there will soon be both Electric Car taxation as well as Bicycle taxes. And in China, people are becoming healthier, so local authorities are allegedly now encouraging people to smoke cigarettes again, in order to help restore their tax take from the tobacco industry.
HMRC in the UK now attempts behavioural taxation by charging a penalty of £10 per day for a maximum of 90 days if the Tax Return is not filed three months after the due date. This is on top of the £100 penalty that applies if the Return is not submitted by 31 January, and a further £300 (or 5% of the tax due on the Return, if higher) if it’s not received by 31 July – with the same charges applying again if not filed by the following 31 January! It should be noted however that the due date is 3 months earlier for paper-filed Returns, which means that these penalties also kick in 3 months before the dates mentioned above.
Even more penalties are charged if there is also tax outstanding after the due date – at a rate of 5% of the tax owing after 30 days, then again at 6 months, and once more after 12 months (so these will be charged on either 1st or 2nd of March, then August, then the following February, depending upon whether it’s a leap year or not).
Despite these swingeing penalties for continued late submission and payment, there are still some for whom the tax deadline comes too early. Help is at hand, but the trick is to get your tax affairs in line sooner rather than later. So do not leave it until the last minute to sort it all out, as the deadline is fast approaching!
For further information on any of the above points please contact Robin Beadle