Clients who wait until January to submit their yearly tax information are the bane of many accountants… Now Making Tax Digital means this process will crop up four times a year… Is there anything the profession can do to speed up self-assessment stragglers?
Ever heard about the taxpayer who couldn’t send their papers because they were “too short to reach the postbox”? Or the woman whose vertigo was so bad, it left her unable to go upstairs to fetch her tax return?
Such dog-ate-my-homework apologies (both genuine excuses received by HMRC) hint at a sorry truth: people really don’t like doing their tax returns.
And Making Tax Digital will require the self-employed to delve into their taxes four times a year. Can anything be done to entice these procrastinating clients to hand their info over earlier?
Here, two experts reveal their tricks-of-the-trade…
1. Create a tax return schedule
Your clients don’t need to assiduously complete their tax return on 6th April, but most accountancy firms send gentle reminders throughout the year nudging them to get their skates on early.
“We send clients emails which set out a timetable including when the return is due, plus any other information they need,” says Sean Glancy, VAT & indirect taxes partner at UHY Hacker Young.
You can then remind them to stay on top of the tax return timetable in ongoing communication.
Smaller practices in particular can excel at this, says Glancy: “The beauty of being a smaller firm is that you see your clients regularly and know them very well. Therefore, you can make them fully aware of what needs to be done [with tax] and what the consequences are.”
2. Keep clients fully informed
As Making Tax Digital (MTD) shows, tax legislation is an ever-evolving beast. It’s important to communicate such changes to clients when they are announced so it doesn’t cause confusion with self-assessment later on, says David Francis, tax investigations officer at Grant Thornton.
“For example, when new housing regulations come out, we inform our clients in the property sector about how these rules will affect them,” he says.
Keep clients in the loop about ongoing changes in tax policy and requirements, so they can keep accurate records in the required format throughout the year. When the tax return deadline looms, they should be a bit clearer on what you need from them, and how they can lay hands on it.
Making Tax Digital Hub
Keep up to date on all things MTD related through our dedicated MTD hub. We’ve gathered all resources, articles and policy updates in one place, so you have everything you need at your fingertips.
3. Reward clients for filing on time
Although there are some clients who systematically input every receipt into a spreadsheet and hand over their statements in mid-April, these are a rare breed. To cajole customers into filing earlier, such as in the quieter summer months, you could offer a sweetener like reduced rates.
It’s a method previously used by Grant Thornton. “To incentivise some clients we have previously offered an early filing discount, but this varies on a case by case basis,” says Francis.
4. If all else fails, shock them
HMRC penalties for late tax returns are somewhat sobering: £100 for a late return, followed by £10 extra per day it’s still overdue after three months. But even this hasn’t quite been enough to get everyone hitting the deadline; in 2018/19 HMRC pocketed a record £860m in fines, up by a quarter from the previous year.
It’s important for accountants to convey the gravity of these fines, says Francis. “There’ll always be a section of our emails and letters that informs people of the financial implications of not filing on time.”
“We don’t want to scare our clients, but the [threat of penalties] can be used as a stick,” says Glancy of UHY Hacker Young. “We make clients aware it doesn’t matter if you’re late by a day, or an hour, these fines are still draconian. One client was fined £22,000 despite only filing 30 minutes after the deadline.”
AAT Business School
We’ve partnered with the experts at the BoB group (Business of Brand) to create a business-changing course to help accountants develop essential skills to be able to protect, grow or reinvent the practice or business they work in.
5. Prioritise the extreme self-assessment stragglers
As the ‘dreadline’ looms, Glancy cautions: “If you think certain clients will be particularly late, prioritise them.”
It can be tempting to dive into the work already on your desk, but careful management of your procrastinators will head off a last-minute panic. So the key here is to get ahead of the problem.
“Don’t use email though. The best thing you can do is pick up the phone to encourage them verbally. It’ll stick in their minds more.”
On a positive note, HMRC revealed that over 93% of self-assessment taxpayers successfully filed their tax returns by the deadline in 2019. That leaves 700,000 people who missed the deadline (hopefully not one of your clients).
If your client does miss the deadline…
Fail to prepare and you prepare to fail… so what are your options if that deadline slips by? All of the following have been deemed acceptable reasons for filing late and can be used to appeal against HMRC’s £100 fine:
- the recent death of a partner
- an unexpected stay in hospital
- your computer or software failing just before submitting, or even while you were preparing your online return
- “service issues” with HMRC’s website
- a fire preventing you from filing
- postal delays
Remember, ultimately it’s the accountant’s duty to ensure clients file on time.
“The majority of people do leave tax returns until November and December, but we still get calls in late-January from people who haven’t got an accountant yet,” says David Francis of Grant Thornton.
“My advice to clients is even if you haven’t filed by 30 January, still go down the process, because it’s much better than burying your head in the sand.”
“We often receive information on the last day,” adds Sean Glancy. “It’s not ideal, but we will do our best to work with that; we’ll always fight our clients’ corner to the best of our ability. Ultimately, the penalties rest with [the clients]; there’s only so much that we can do…”
Read more on tax in general as part of our #AATPowerUp Tax 2020 campaign for September and October;
- Power up your tax knowledge with AAT
- The AAT’s guide on self-employed tax reporting and payment
- How MTD for income tax will shape the digital landscape
- HMRC self-assessment tax returns
Christian Koch is a contributor for AAT's members magazine, AT.