In October I wrote about the new penalties employers face if they pay their PAYE late. With the 31 January self assessment tax return deadline looming it is worth remembering that the penalties for failing to file these returns on time have become far harsher this year. In the past, there was no penalty if you had no tax to pay and you could avoid a late filing penalty as long as you had paid the tax due by 31 January. Things have changed dramatically.

If you are a day late in filing your self assessment return, you will face an automatic £100 penalty. If the return is not filed by 30 April then penalties of £10 per day will accrue for 90 days. A second penalty of up to £300 will then be levied with a further £300 six months later. A delay of a year could cost £1,600 in penalties.

Also, from April 2012 all VAT returns will have to be completed online with penalties for those who fail to comply. Company tax returns already have to be filed online using the iXBRL format. Most PAYE filing is also now online. And there are automatic penalties for late – even one day late - payment of PAYE.

HMRC is clearly determined to enforce timely filing of returns and prompt payment of tax. Looking at the UK’s finances it is hardly surprising. Our borrowings now stand at around £1000 billion and the borrowings will continue to rise by a further £137 billion in the current year, £127 billion in 2012, £120 billion in 2013, £100 billion in 2014, £79 billion in 2015 and £53 billion in 2016. UK growth for the current year has been revised downwards from 1.7% to 0.9% and for next year from 2.5% down to 0.7%. Inflation stands at 5.2%. We are at least not in recession, although the Chancellor warned that if the rest of Europe heads into recession, it may be hard to avoid one here.

You can avoid penalties by filing and paying on time. Marking up your calendar is one way to do this but there is a great reminder service on the Business Link website at www.businesslink.gov.uk/bdotg/action/keydates. It covers PAYE, CIS, VAT, Corporation Tax, Self Assessment, and Companies House filing dates.

We all have to pay tax, but paying penalties is entirely avoidable.

For more information, please contact us.