2.5 Million Face Tax Penalties Due to COVID Delays

Millions of self-employed people face penalty fines for missing the self-assessment tax deadline because of Coronavirus-related delays after HMRC rejected calls from accountants to extend the filing deadline.

According to research by the Association of Chartered Certified Accountants, around 2.5 million entrepreneurs are expected to miss the 31st January deadline to file Self-Assessment taxes for 2019-20 and face £100 penalty fines as a result (ACCA).

Based on the minimum fine, this would earn the revenue around £250 million.

The ACCA surveyed 14,000 clients- entrepreneurs and self-employed people- and found that nearly one in five expected to miss the tax deadline. By comparison, last year, only 5% of self-assessment returns were filed late, according to data from HMRC.

ACCA said that over half of the clients they surveyed were unable to access the information and tools they needed to file taxes because they were busy dealing with other business issues.

Nearly three-quarters of those surveyed also reported feeling more anxious than usual. Around a quarter of respondents said they were having trouble sleeping or facing worsened mental health conditions.

The body's Head of Policy & Technical Advisory, Glenn Collins, wrote in a letter to HMRC:

Feedback suggested that businesses are struggling to juggle urgent business continuity and compliance challenges, including Brexit readiness preparation, staffing pressures, childcare and carer responsibilities, and difficulties accessing the information due to working remotely under lockdown measures.

In its latest bulletin, one of ACCA's 90,000 members reported spending 'on average three days trying to contact HMRC on webchats,' while another said reported having over forty clients on his books who would not be able to file on time.

HMRC's latest monthly performance report, for November 2020, showed a sharp increase in waiting times to contact the department online and via post.

Over the month, more than half of online queries were not answered for over a week, compared to an average of just 10%, while 4 in 10 people sending queries via post waited longer than a fortnight to get a response.

The average time it took to answer a call also crept up, from an average of just over 7 minutes to 12 minutes and 45 seconds.

Although it continues to publish data on its performance, HMRC has temporarily lifted targets, acknowledging the 'significant impact' that Coronavirus is having on its operations.

Despite this, the tax authority has not changed its position on January's looming tax deadline. In a letter sent to the UK's major accounting bodies, HMRC Permanent Secretary, Jim Harra, wrote:

We will continue to encourage timely filing in our communications. Any departure from this simple message increases the risk that taxpayers will miss both filing and payment deadlines unnecessarily or miss out on the simple arrangements we have put in place for securing time to pay.

Harra also hinted at the possibility of relaxing the appeals process for fines:

I want to reiterate that no taxpayer or agent who is unable to submit a return by 31 January for reasons related to the pandemic should worry that a penalty will be payable; it won't, and we will make the process of canceling penalties as simple and easy as possible for all concerned.

Meanwhile, a spokesperson from HMRC also suggested that the department would consider taking a sympathetic approach to people forced to file late as a result of the pandemic:

We know some taxpayers and agents will struggle to meet the deadline and are carefully considering how to further ease the position for them, including options that would significantly simplify the handling of reasonable excuses for taxpayers, agents, and HMRC.