File before Jan 31 despite HMRC penalty waiver, self-assessors urged

Sole trader freelancers should not put too much stock in the taxman’s self-assessment penalty waiver – even if it does apply from this coming Monday.

Thomas Wallace, formerly an inspector for HMRC which announced the waiver on January 6, says the self-employed ought to regard the waiver as a “last resort.”

‘Welcome relief, if freelancers really need it’

Graham Jenner, an accountant agrees, telling FreelanceUK yesterday that the self-employed must treat the delay in HMRC fines arising as “welcome relief” -- yet only “IF” they need it.

And tax adviser Helen Christopher says despite the Revenue not charging late filing fees to self-assessors who file their 2020/21 return by Feb 28, her advice still is to file before Jan 31.

‘What’s not being mentioned’

The trio of experts are united in their thinking, and their reasoning.

Now at WTT Consulting, Mr Wallace explained: “What is not being mentioned [very clearly by HMRC] is that your return and payment will still be late if it is not made by Jan 31.

“[So] late payment interest will continue to accrue from Feb 1.

“Given HMRC late payment interest rate increased to 2.75% on Jan 4, a rate well above BoE base rate, [freelancers] would be unwise to see this as a cheap way to increase cashflow.”

‘Interest accrues from Tuesday’

At Genie Accountancy, where Ms Christopher is chief operating officer, she echoed: “Interest will accrue from Feb 1 despite these extended dates.”

She was referring not just to the Feb 28 penalty deferral, but also to HMRC agreeing that those who don’t pay by Monday won’t be penalised if they set up a payment plan by April 1.  


But accounting firm Jenner & Co sounds acutely aware that when deadlines are moved from their usual dates, those with ‘extra time’ on their hands risk falling foul of a slippery slope.

“As with any extension, many of those who haven’t submitted their return close to the normal deadline then procrastinate, until the deferred deadline is looming,” said the firm’s Mr Jenner.

“Personally, I have never quite understood the need for an extension, when the taxpayer has already had nearly 10 months to prepare and submit their self-assessment return.”

‘Staffing issues due to covid’

As it’s just the penalty been waived, meaning “interest still runs on any unpaid tax,” Mr Jenner suggests freelancers should regard the waiver as a help to accountants, not themselves.

This year, like last year, the penalty waiver is, perhaps, more of a recognition from HMRC that accountants may still have staffing issues due to covid-19 at this busy time of year,” he said.

WTT Consulting, where Mr Wallace is tax investigations director, reflected: “We’ll continue to file all of our clients returns by the deadline and encourage payment by the normal due date.

“This [HMRC waiver] really should only be seen as a measure of last resort where covid has caused unavoidable problems.”

‘HMRC enquiry window extends until April 2023’

On LinkedIn, the tax dispute expert shared additional downsides of not filing until Feb 28.

“It means that [HMRC’s] enquiry window for investigating the return will be extended -- to the quarter date following submission of the return.

“For a return filed on 28 Feb, HMRC will be able to open an enquiry right up until April 30 2023.”

‘Repercussions for tax credit claimants, and the self-employed’

Addressing specific groups of taxpayers, Mr Wallace continued: “If you are in receipt of tax credits and you do not submit your return by the normal deadline, HMRC will finalise your claim using information they hold which may be outdated or incorrect. If the return is then submitted by 28 Feb, HMRC will use discretionary powers to re-make the decision if the delay was due to coronavirus.

“[And] self-employed taxpayers who claim, or may claim, certain contributory benefits soon after 31 Jan need to ensure they have filed their return and paid their Class 2 NIC contributions by the normal deadline to ensure their claim is unaffected.”


25th January 2022

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