Due to COVID HMRC have announced for the second year running that they will waive late filing and payment penalties for 2020/21 Tax Returns as long as Returns are filed by 28th February and payments are made by 1st April.
This all sounds really good news but there are a number of consequences that taxpayers should consider.
Extended Enquiry Window
Delaying the online submission of a Tax Return into February 2022 even by a day extends HMRC’s enquiry window so for Returns filed by 31st January the enquiry window closes 31st January 2023 but if filed in February the window does not close until 30th April 2023 which gives HMRC a further 3 months to open an enquiry.
Unforeseen illness or other problems arising during February may result in penalties as it is unlikely that a reasonable excuse will exist for non-submission of the Return before the usual 31st January 2022 deadline.
Although penalties will not be charged if submitted by February interest is still chargeable on outstanding amounts of tax liability unpaid by the 31st January charged at 2.75% per annum.
If class 2 national insurance is not paid by 31st January 2022 some state benefits may be affected such as Maternity Allowance and contributory employment and support allowance.
Taxpayers who cannot pay their balancing payment by 31st January should contact HMRC to reallocate payments against class 2 liability in preference to other liabilities.
Individuals claiming tax credits may need to take further action as actual income figures must usually be given to the tax credit office by the 31st January 2022 where estimated figures were provided by 31st July 2021.
If the 31st January 2022 deadline cannot be met actual figures should be reported as soon as possible.
In some cases reporting final income figures after the 31st January deadline may impact the finalised tax credit award which should not be the case if reported by 28th February and the delay was due to COVID 19