Where self-assessment tax returns are submitted by 28 February 2021, the first late filing penalty of £100, which is usually automatically generated for returns submitted after 31 January, will not apply. This one-off change is the result of lobbying through professional bodies that HMRC should show more leniency due to the difficulties faced by agents and taxpayers as a result of the pandemic.
The extension is relevant only in respect of filing returns, meaning that the deadline for payment of tax remains unchanged. Interest on late tax will be charged from 1 February 2021 for any liabilities remaining outstanding after the 31 January 2021 payment date. Amounts payable on 31 January also included liabilities in respect of 31 July 2020 payments on account for individuals who took the opportunity to defer their payment by six months.
In circumstances where the amount of tax owed remains uncertain due to the problems faced as a result of the pandemic, payment should be made based on reasonable estimates to avoid interest accruing so far as possible.
Those who file late should be aware that HMRC's enquiry window will be extended. In cases where the statutory deadline of 31 January 2021 has been missed, HMRC can open an enquiry up to the next quarter date, following the anniversary of the day the return was filed. This means that for returns submitted by 28 February 2021, HMRC will have until 30 April 2022 to start an enquiry.
Taxpayers who cannot afford to pay their latest tax bill have the option to set up a 12-month payment plan before 1 April 2021. However, this can only be negotiated with HMRC after the tax return is filed. The instalments can be spread over 12 months if an individual owes less than £30,000 with no other payment plans in place. Although HMRC will give a degree of flexibility in respect of the monthly repayments, interest will be charged, currently at 2.6 per cent per annum, on amounts remaining outstanding.