Extend the SA filing deadline or waive penalties?

3 November 2020: ICAEW is acutely aware of the pressure on member firms as the self assessment filing deadline approaches. The Tax Faculty is seeking members’ views on the options, to inform its discussions with HMRC.

Over the last couple of months ICAEW has been contacted by members in practice, expressing concerns about their workload as the self assessment (SA) filing deadline approaches. Tax Faculty committees have discussed whether ICAEW should make representations to HMRC asking for the SA deadline to be extended.

To date, there has not been a consensus among members. Some members acknowledge that clients have provided data earlier than in previous years and are ahead of schedule, and others want to avoid those clients who typically are very late providing information working to whatever later deadline might be granted.

However, many member firms are under enormous resource pressure due to assisting clients with claims for COVID-19 related financial support and providing other pandemic-related business advice. While working every hour possible, they will still struggle to meet the filing deadline for all their clients.

Added to this is the direct impact of the pandemic on firm’s staff including time lost due to illness, self-isolation and caring responsibilities – some of which is still to come and could hit close to the filing deadline. 

Also, many clients are only now becoming aware of the extent to which they will need to take action with regard to importing and exporting following the end of the EU exit transition period and seeking advice.

The announcement of additional restrictions across the UK and the extension of the Coronavirus Job Retention Scheme have only added to the pressure on firms.

One option for HMRC and government is to extend the 31 January filing deadline for SA returns filed online, say to 31 March.

Extending the filing deadline would have several knock-on effects including:

• The finalisation date for tax credits would also need to be extended.
• The payment deadline and the 30-day trigger date for late payment penalties would also need to change.
• The impact on the enquiry window for SA returns would need to be considered.
• The collection of Class 2 national insurance contributions requires manual intervention if paid after 31 January which would add to pressure on agents and HMRC. (There is a potential impact on claims for Employment and Support Allowance if contributions are not paid by 31 January.) 

This list is not exhaustive and deadlines for other claims and elections (eg, gift aid carryback) might also need to be considered.

ICAEW is mindful that if the pandemic continues to have an impact well into 2021, the government may wish to look to data in 2019/20 SA returns when designing support schemes and might suddenly impose a date by which returns need to be filed to qualify for support.

Might a better option be a waiver of late filing penalties for all 2019/20 SA returns filed (online or on paper) by 31 March 2021? The waiver would need to be automatic (ie, HMRC would need to not issue the penalty notices) to avoid the need for formal appeals that would put additional pressure on taxpayers, agents, HMRC and, in due course, the Tribunals.   

If the return is not filed by 31 March, ICAEW would expect the penalties to be charged and the usual reasonable excuse provisions to apply to any appeal.

HMRC has already indicated that the pandemic may constitute reasonable excuse for late filing, and ICAEW would expect HMRC to be sympathetic to appeals made by taxpayers based on their own circumstances.

ICAEW is concerned that reliance on an agent is generally considered not to constitute reasonable excuse for late filing. Appeals against late filing penalties may be rejected on that basis, for example, where the taxpayer provided all the necessary information to the agent but due to workload and staff absence the agent is unable to file the return in time.

The Tax Faculty would welcome members’ views on whether, given the knock-on effects, we should be seeking an extension to the filing deadline or whether a waiver of late filing penalties would be a better solution.

To be of value any easement would need to be announced very soon; please make your views known by completing this form.