Has anyone else seen the new penalties to be in place this year? If you're 3 months late with your tax return you will have racked up £1000 in charges! Whilst HMRC think this is an incentive to file on time, what will actually happen is the people (I come across many) who have got themselves in a bit of a mess and got behind will not be able to afford to try and catch up and so will continue to ignore letters or never quite get round to registering.
Extract from what I have received today:
The new penalty regime for ITSA 2010/11 returns will be:
Late filing penalties:
·When any return is late, an initial £100 fixed penalty arises the day after the filing date. This applies even if there is no tax to pay or the tax due has been paid on time.
·Individuals are notified they will be liable for a further daily penalty if the return is not submitted within three months of the filing date. The penalty is calculated at £10 per day, until the return is filed, for a maximum of 90 days (up to £900).
·After the daily penalties, and if the return is still outstanding six months after the filing date, a further penalty arises, calculated at five percent of the tax liability on the return or £300 if this is higher.
·Where the return is still outstanding after 12 months, a further penalty arises, calculated at five percent of the tax liability on the return or £300 if this is higher.
·If a determination has been made because the return has not been received, the penalties at 6 and 12 months will be based upon the estimated amount in the determination, and then adjusted retrospectively when the self-assessed amount is returned.
Late payment penalties:
-At thirty days late there will be charged an initial penalty of 5% of the tax unpaid at that date.
-At six months late and there will be charged a further penalty of 5% of the tax that is still unpaid.
-At twelve months late there will be charged a further penalty of 5% of the tax that is still unpaid.
-These penalties are additional to the interest that will be charged on all outstanding amounts, including unpaid penalties, until payment is received.
These penalties will be issued automatically to all those in ITSA who do not file and pay on time. Taxpayers will be able to appeal against any penalty on the grounds that they have a reasonable excuse for not complying on time and all penalty notices will include an appeal form and details on how to appeal.
-- Edited by BudgetB on Monday 4th of April 2011 12:14:24 PM
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
At the very least, they should have made the £100 late filing penalty stick. I have a client coming to see me in about half an hour to bring his affairs up to date - 3 years tax returns, penalties of about £500. He normally gets a refund, so all will be wiped out.
Before anyone asks, yes I have kicked him quite a few times, and it really is beyond me why anyone who normally gets a refund does not get their tax return sorted!
But the penalties proposed do seem quite extreme. The people who get into a bit of a mess, as mentioned, will ultimately (and unfortunately) have more to pay.
I wonder whether many will actually end up with CCJ or bankruptcies instead due to being unable to pay the cost of the accountancy to get it all done, the tax, the penalties, the interest etc.
At least at this point this will only affect returns from 10/11 onwards, it is my understanding that the penalty structure for previous returns remains unchanged, for now.
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
I actually think it should have a positive impact. There really is little excuse for filing things so late.
As the bookkeeper/ accountant you need to advise the client that this regime is coming into place. Ensure that your procedures are there to get the information as soon as possible so that you cannot be deemed liable.
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Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
Jenny, your opening remarks will have to be along the lines of "hello, you're gonna be stung for penalties, regardless of whether you use me or not! Now we've got that unpleasantness out of the way..."
Unfortunately it will happen. We too have introduced procedures to make sure that all clients are kicked regularly. But as Phil intimated, it's their own fault.
For example, I have literally just the put the phone down from a guy, has three companies, all of which are behind in one way or another, and I don't think he's even registered for SA yet. In a self sadistic kind of way I do quite like these type of clients, I quite enjoy the challenge of getting them on the straight and narrow!
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Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
Jenny, your opening remarks will have to be along the lines of "hello, you're gonna be stung for penalties, regardless of whether you use me or not! Now we've got that unpleasantness out of the way..."
Unfortunately it will happen. We too have introduced procedures to make sure that all clients are kicked regularly. But as Phil intimated, it's their own fault.
I think I actually intimated to make sure it is clear it is the clients fault and that you cannot be deemed liable for the penalty!
As said it is amazing how how many times I here 'but my accountant didn't do this.....' when quite often it is actually the client to blame
__________________
Phil Hendy, The Accountancy Mentor
Are you thinking of setting up your own practice or have you set up and need some help?
If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.
Love it!!! Sorry to sound sarcastic, but I have an EX client who doesn't take the financial side of the business seriously (thats why I left, I was offered something far better), and basically due to their current situation they haven't even filed their accounts from 2009, they are 8 months late and as far as I know aren't anywhere near ready!!!!! I did warn them a while ago when they phoned for help that they needed to stop burying that head in the sand but as usual it fell on deaf ears. Maybe money out of the business, money I know they have not got may make then see sense before its too late!
The really stupid thing in all of this is they have the potential to have a great business!!!!
Sometimes it is so difficult to work with people who just don't listen and don't want to listen and think they know it all when really they just can't put 2 and 2 together let alone their own bookkeeping! Maybe people will start taking things more seriously now if its going to hit them in the pocket abit harder. I must say that prior to me working for them they actually didn't have a bookkeeper for a year and thought just writing a few cheques out and a few invoices that looked rubbish was OK! When they phoned the other month for some help they didn't even know what a bank rec was so needless to say they haven't done one for a long time. I came to the conclusion that some just can't be helped as they aren't interested.
Sorry my moan over with now. Luckily all of my current clients don't fall into this category so I'm lucky really.
-- Edited by Amanda on Tuesday 5th of April 2011 04:24:21 PM
