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Freelancers: don't put off filing your tax returns

Freelance consultants could face hefty fines if they leave their self assessment tax returns to the last minute, thanks to a glitch in HM Revenue & Customs’ online system.

Experts at the Institute of Chartered Accountants in England & Wales (ICAEW), which discovered the problem, say some taxpayers who went to file this month were told they were no longer registered for e-filing.

Although their user identifications and passwords were accepted by HMRC’s portal, a computer glitch mysteriously struck the taxpayers off the authority’s database.

Staff at the HMRC helpline said they must re-register for online self-assessment, meaning the taxpayers had to wait for a new activation code, which takes up to seven days to arrive.

The institute said fortunately the affected taxpayers did not have any outstanding tax to pay, but others who leave their filing nearer the end of January risk cash penalties if the problem reoccurs.

Self-assessment tax returns for the year ended April 5, 2006 must be filed with HMRC no later than midnight on January 31, 2007. Late returns will result in a penalty of £100.

The taxman’s confirmation e-mail sent to taxpayers once it has received their returns has also been hit by a computer glitch, though this problem has now been resolved.

On top of the automatic penalty of £100 charged for returns not received by 1 February, if the tax return is still outstanding by 31 July a second £100 fine is incurred.

A penalty can also be imposed based on the amount of tax owed for the year if returns are still overdue 12 months after the filing date.

Jane Moore, of the institute’s Tax Faculty, said: “It’s true that tax returns can be complicated and confusing, and this often depends far more on the circumstances of the taxpayer rather than their wealth, but missing the deadline is just not worth the penalties.

“The ICAEW has produced a list of ‘top tips’ for the 2007 deadline which provide sound guidance for those with relatively straightforward affairs; but if you find yourself struggling with the form, contact a chartered accountant. We can provide professional advice and save a lot of time and stress.”

Jan 22, 2007
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