As the famous Benjamin Franklin quote goes, ‘nothing is certain, except death and taxes’. Even after 200 years, tax hasn’t managed to shake off its reputation as a task as daunting as planning a funeral. In fact, research by Informi suggests that the infamous complexity of tax has led one in four SMEs missing their tax deadlines, and a huge number paying penalties for their returns being late or inaccurate.
If you’ve missed your deadline or are struggling with a big bill, you’re not alone. Here are our tips on dealing with it.
I missed the self-assessment deadline. What happens now?
Failure to upload your tax return by 31st January will land you a £100 fee from HMRC. The good news is that the fee is a one-off. After missing the deadline, you have three months to upload your tax return and settle your bill.
Failure to submit your return within the three month extension window is where things start to get sticky. After three months, for each day you fail to pay your tax bill you will be fined £10, up to a maximum of £900. After six months, you’ll be charged £300 or 5% of your overall tax bill (whichever is higher). After 12 months, the £300/5% fine will be repeated.
Don’t use the extension period as an excuse to put your return on the backburner. Sort out your self-assessment as quickly as possible to avoid extra penalties. You never know what might throw a spanner in the works.
Can I appeal my fine?
A fine can be appealed if you have a “reasonable excuse”. Reasonable excuses include bereavement, illness, fire, flooding, theft, computer problems, unexpected postal delays and service issues with HMRC. This means that if you were affected by Monday’s phone line chaos at HMRC you can appeal your late fee.
Unfortunately, your accountant or bookkeeper filing your tax return late is not considered a reasonable excuse. According to HMRC, other unreasonable excuses include:
- Your yacht catching fire with your self-assessment on it
- A wasp causing you to crash your car and destroy your return
- Your husband misinforming you of the deadline*
In all seriousness, if there is a genuine reason as to why your assessment was late, inform HMRC as soon as possible. Note that appeals are judged on a case-by-case basis and may require evidence.
*These were all actually submitted as excuses to HMRC
Paying my tax bill is going to seriously disrupt my cash flow. What are my options?
For small businesses, a large or unexpected tax bill can can cause cash flow problems–especially if your revenue has taken a hit over the Christmas period.
If settling your tax balance is going to hinder the growth of your business or cause operational issues, there are ways to minimise disruption. Paying your bill with a special tax loan will allow you to spread the cost over a period of time, instead of committing a significant sum of money at once.
Alternatively, while missing the self-assessment deadline will cost you £100, it will buy you a month or two to get your liquidity flowing again before you settle your tax bill in full (however, it’s important to note that this isn’t a solution for deeper financial issues).
Finally, how can I make sure I don’t miss the deadline again?
Well, I’m glad you asked. Firstly, work out why you missed the deadline in the first place. Informi found that of those who missed the self-assessment deadline, a quarter didn’t know how to fill out their tax return and nearly a third didn’t know that they had to complete one. Next year, know your status, plan ahead and get help from an accountant or tax adviser.
Unfortunately, tax is still taxing. However, empowering yourself with the right information can help ease the headache. While missing the self-assessment deadline isn’t the end of the world, moving slowly and racking up penalties could be. As an SME, when it comes to tax, try to stay ahead in the game. And psst – keep your self-assessment away from your yacht.
Originally published February 3 2017 , updated June 12 2018