Limited time penalty waivers for 2020/21 tax returns

To help taxpayers and advisers affected by the surge in Covid-19 cases as a result of the Omicron variant, HMRC have announced that penalty waivers will apply for a limited time where the 2021/22 tax return is filed late or where tax due on 31 January 2022 is paid late.

Late filing penalty

The 2020/21 tax return was due to be filed online by midnight on 31 January 2022. Where this deadline is missed, normally HMRC would charge a late filing penalty of £100 automatically. The exception to this rule is where the notice to file a 2020/21 tax return was issued after 31 October 2021, in which case a later filing deadline of three months from the date of the notice to file applies. Where a late filing penalty is issued, the taxpayer can appeal the penalty if they have a ‘reasonable excuse’ for missing the deadline.

However, in recognition of impact of Covid-19 on the ability of taxpayers and their agents to meet the 31 January 2022 deadline, HMRC have announced that they will not charge a late filing penalty as long as the 2021/22 tax return is filed by midnight on 28 February 2022. This will give taxpayers an extra month in which to file their return. The move is perhaps not entirely altruistic on HMRC’s part as it is likely to save them from dealing with a large number of penalty appeals where the late filing is attributable to the reasonable excuse of Covid-19.

Late payment penalty

A tax payment deadline also fell on 31 January 2022. This is the date by which any tax and National Insurance still due for 2020/21 must be paid, along with the first payment on account for the 2021/22 tax year.

Normally, a late payment penalty of 5% of the outstanding tax would be charged where tax due by 31 January 2022 remained unpaid by 31 March 2022. However, HMRC have announced that they will not charge a late payment penalty as long as the taxpayer has paid their tax in full or agreed a Time to Pay arrangement with HMRC by midnight on 1 April 2022.

If you know already that you will struggle to pay your tax bill in full by 1 April 2022, you should act now to set up a Time to Pay arrangement, which will allow you to pay what you owe in instalments.

Interest

Interest payments have not been waived. Where tax is not paid by 31 January 2022, interest will run from 1 February 2022 until the date of payment.

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