Health restrictions and mounting work pressures are making the self-assessment tax deadline incredibly challenging, writes Phil Hall.
Almost a million self-assessment tax returns, of the 11 million due, were filed late in the last financial year.
As a result of the coronavirus (Covid-19) pandemic, the situation will likely be much worse this year and late filings will rise dramatically.
Effects of lockdown 2.0
The likelihood of late filing was already very high as a result of months of pandemic-related chaos. But it increased dramatically once a second national lockdown was announced.
Although the latest lockdown ends this week, the draconian measures that remain in place for much of the country also make completing accounts and filing on time that much more difficult – and that’s to say nothing of the very real prospect of a third lockdown next month.
There has been a raft of government assistance to mitigate the worst of the economic problems caused by coronavirus, so it doesn’t seem unreasonable to ask what could be done to reduce the chances of millions of people being landed with at least a £100 late filing penalty, and in many cases much more, to add to the growing financial problems many are currently enduring.
Pressure on accountants
Accountants have found themselves in a war of attrition in 2020, as the health crisis has dragged on and the economic emergency has been heightened.
Helen Geatches, FMAAT, of Devon-based accountancy firm Stapletons, summarised the problems she has witnessed:
“We have worked longer hours all year, running furlough and helping and supporting businesses with grants, loans etc. so a much heavier workload than usual. Speaking to other accountancy practices, this seems to be a very common issue.
“The first lockdown meant that we were short-staffed, so we’ve been playing catch-up ever since, we are now in a second lockdown, clients are travelling around less and also more wary about bringing records to us.”
Case for extending the deadline
Peter Boardman MAAT, of Lowestoft based Juler Tooke Accountants & Business Advisors, believes a filing extension is absolutely necessary and explained;
“My main worry is not the timing of payments to HMRC, but the sheer volume of work needed to prepare and submit all the tax returns by 31st January.
“As a firm, we have never missed the deadline when the client has provided us with all the relevant information by 31st January.
“However, the amount of additional work created by the various HMRC schemes and generally supporting our clients through such difficult times, coupled with a second lockdown so late in the year, has put pressures on us that will mean us all working exceptionally long hours during the next two to three months to be even close to getting all the returns prepared.
“The stresses I will be placing myself and my colleagues under cannot be good for either our mental or physical health.”
Accountants take to LinkedIn
Just how widespread these concerns are was shown by a viral post on LinkedIn by accountant Nichola J Sorrell, MD of Effective Accounting Solutions Limited.
The article described the last six months for accountants as:
- A gruelling slog of reading, deciphering and interpreting sometimes daily updates from Rishi [Sunak, Chancellor].
- Learning a long list of new words, acronyms and support schemes; Furlough, CJRS, SEISS, BBL, CBILS, Job Retention Bonus, JSS.
- A challenging time to put in place processes and systems to manage the new #furlough system.
- A busy time supporting all their clients through phone calls, email updates, WhatsApp and Facebook groups – often around the clock.
Nichola’s post was viewed over 60,000 times and received 1,250 reactions.
AAT makes its case to HMRC
As many AAT licensed accountants face similar problems, an increasing number have suggested an extension to the self-assessment deadline to 31 March 2021 or the end of the tax year on 5 April 2021 if that was administratively easier.
In responding to these legitimate member concerns, AAT has identified three potential solutions and last month brought them to the attention of the senior leadership team at HMRC.
The deferral of the July 2020 payment on account means lots of taxpayers will now be facing a much bigger bill on 31 January 2021 than they otherwise would have.
Drawbacks: another delay, whether to 31 March or 5 April 2021, could further increase the amounts owed, potentially making it less manageable for some taxpayers to meet their obligations.
Advantages: a two-month delay is unlikely to make a significant difference in terms of ability to pay but a very big difference in terms of ability to file on time and administrative burden.
The approach is to maintain a deadline of 31 January 2021 but waive the £100 late filing penalty until 31 March or 5 April 2021.
Drawbacks: the problem with this approach is that it doesn’t differentiate between those having genuine coronavirus problems and the disorganised who would have filed late anyway. With 950,000 failing to submit by the 31 January 2020 deadline, when coronavirus had zero impact on filing, waiving the deadline in this respect may not be the most financially prudent way forward.
Advantages: there have been numerous financial responses to coronavirus that have taken a blanket rather than differentiating response in the interests of best supporting those in genuine need and this could be another one.
3. Time to Pay
AAT very much supports HMRC’s increased use of the Time to Pay facility for those who are struggling but believes the 2.6% interest rate on these arrangements should be temporarily suspended for those who have been impacted by coronavirus.
Advantages: the use of the Time to Pay arrangements is particularly helpful in differentiating between those who genuinely need help because of coronavirus rather than providing blanket assistance for everyone.
Drawbacks: whilst temporarily suspending the interest payments on such arrangements will help with the economic consequences of coronavirus, it does little to address the significant administrative burdens and obstacles being faced by agents and their clients.
Since this article was written on 1 December 2020, HMRC Chief Executive Jim Harra confirmed to AAT that HMRC would not extend the deadline. However, they have agreed to waive penalties to anyone affected by Coronavirus by confirming that Coronavirus will count as a “reasonable excuse” for not filing on time.
HMRC also clarified that in the event that someone who has been unable to file on time receives a penalty notice, they or their accountant will be able to get this cancelled easily by contacting HMRC. HMRC additionally confirmed that they will give customers and their agents more time by extending the penalty appeal period from 1 to 3 months.
This doesn’t go quite as far as AAT would have liked and so we will be holding HMRC to their commitment to keep the filing deadline under constant review throughout January 2021.
AAT is also pressing HMRC to introduce an “agent based” appeal mechanism. Where an accountant or accountancy firm has hundreds of clients all unable to file because that accountant has contracted Coronavirus or for some other Coronavirus related reason, it would clearly make sense for an agent based appeal rather than hundreds of individual “reasonable excuse” applications having to be made by clients. This would not only save time for thousands of individuals and small businesses, it would save HMRC considerable time and resource too.
Phil Hall is AAT's Head of Public Affairs and Public Policy.