Tax administration

16 Mar 2021

We are mindful that businesses and individuals may struggle to meet their compliance obligations during the COVID-19 crisis. We have made a number of suggestions to mitigate these difficulties with HMRC and HMT, and discussions continue. In particular, we have made suggestions around:

  • Deferring deadlines, for the submission of returns, submitting claims and elections and appeals, and responding to HMRC enquiries.
  • Allowing estimated returns to be submitted, where it is not possible to locate or prepare accurate figures.
  • Accelerating tax refunds, in order to provide much needed funds back into the hands of businesses and individuals.
  • Provide clearer guidance around time to pay, such as when to call, the type of information businesses will be required to supply, and the extent of the support HMRC is authorised to provide.
  • Authorising an agent, so that businesses and individuals can authorise an agent in a manner consistent with their circumstances.

Specific measures are set out below, and we have highlighted a number of particular issues which we have raised with HMRC.

If a taxpayer is unable to meet a tax obligation due to the impact of COVID-19, will HMRC accept that as a reasonable excuse?Yes, where a taxpayer is unable to meet an obligation due to the impact of COVID19, HMRC will accept that as a reasonable excuse, provided they managed to remedy the failure as soon as they were able to do so. GOV.UK guidance has been updated – see here.
Will HMRC allow taxpayers more time to seek a review of, or appeal against, an HMRC decision if they or their business have been affected by coronavirus?Yes, HMRC will allow taxpayers further time for seeking a review of, or appealing against, an HMRC decision, (including to not oppose an application where only the Tribunal may accept a late appeal) if they or their business has been affected by coronavirus. For more details see here and here.
Will HMRC charge a late filing penalty for 2019/2020 self-assessment tax returns filed after 31 January 2021?On 25 January HMRC announced that there would be no Self-Assessment late filing penalty for those who file their 2019/2020 tax return online by 28 February 2021. See the following Letter from Jim Harra on Self Assessment Filing Penalties.
Penalties for late payment of 2019/20 self-assessment tax liabilities

On 19 February 2021, HMRC announced that because of the impact of the COVID-19 pandemic self-assessment taxpayers will not be charged the 5% late payment penalty if they pay their tax or set up a payment plan by midnight on 1 April 2021.

The deadline for paying 2019/20 self-assessment tax was 31 January 2021 and interest is charged from 1 February on any amounts outstanding. Normally, a 5% late payment penalty would also be charged on any unpaid tax that is still outstanding on 3 March 2021.

For further information see GOV.UK.

For how to set up a payment plan see GOV.UK.

Daily penalties for late filing of 2018-19 self-assessment tax returns

HMRC will not be charging daily penalties where someone has been late in filing their 2018-19 self-assessment tax return. This is in recognition of the exceptionally difficult circumstances many taxpayers have faced due to the impact of the COVID-19 pandemic during the period when the daily penalties accrued. 

We understand that no daily late filing penalties have been or will be issued by HMRC in relation to 2018-19 tax returns filed late.

The mandatory 6-month and 12-month late filing penalties will apply for 2018-19 tax returns as normal. Where a 6-month or 12-month late filing penalty is charged there is the usual right of appeal against that penalty. HMRC will consider coronavirus as a reasonable excuse for missing return deadlines. HMRC continue to require customers to file their returns where they are able to. 

Time to pay arrangementsHMRC can agree time to pay arrangements with any businesses that cannot pay their tax because of COVID-19. They will agree these on a case-by-case basis and tailor them to meet individual circumstances. There is a dedicated helpline for dealing with time to pay arrangements. If businesses need help or want to talk about their options, they can phone HMRC on 0800 024 1222. More information on this can be found on GOV.UK. If you owe £30,000 or less then you might be able to set up a Time to Pay Arrangement online. This lets you pay your self-assessment tax bill in instalments.
Code of Practice 9 (COP9) Will HMRC consider moving the fixed 60 day deadline for taxpayers to complete and submit the initial forms at the start of a COP9 investigation if taxpayers cannot respond in that time due to issues connected to the COVID-19 outbreak?

HMRC have responded as follows, 'We know that this is a difficult time for many of our customers, including those customers who have been offered the opportunity of the Contractual Disclosure Facility (CDF) under COP9. HMRC will consider any request for an extension to the 60-day response period under the extenuating circumstances provision and in line with the published guidance at Fraud Civil Investigation Manual (FCIM204030). To request an extension, the customer or their agent should contact HMRC as follows:

For customers who have received the CDF offer from HMRC, please contact the Fraud Investigation Service Investigator, who wrote to them offering the CDF. 

Whether the COVID-19 crisis will affect the UK’s implementation of the EU Mandatory Disclosure Rules DAC6? 

The reporting deadlines have been deferred due to the COVID crisis – see HMRC’s guidance IEIM 800010.

HMRC have produced additional guidance to provide clarity on how reasonable excuse will apply to obligations under DAC6 see IEIM800000

From 1 December 2020, when a business enters insolvency, HMRC will become a secondary preferential creditor in respect of VAT debts owed at that date (clause 95 Finance Bill 2020). Presumably this will include any VAT that has been deferred under the COVID-19 relaxation measure (see here) because it won’t be payable until 31 March 2021, and so in many cases will be unpaid at 1 December 2020?HMRC have responded as follows, 'If a business becomes insolvent on or after 1 December 2020, any VAT that has been deferred under the VAT deferral measure will become a debt'. 
Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) reporting. HMRC have published an update in the International Exchange of Information Manual (IEIM 800000) concerning reasonable excuse in the context of CRS and FATCA reporting. This says:  'For Common Reporting Standard and Foreign Account Tax Compliance Act, reports for the calendar year 2019 are due to be filed by 31 May 2020. HMRC recognises that because of COVID-19, financial institutions may not be able to meet this deadline. In these unprecedented circumstances, HMRC accepts that any financial institution that files a return late because of COVID-19 difficulties will have a reasonable excuse (and so will not be liable to any penalties for that delay) provided the report is made without unreasonable delay after they are resolved.'
Country by Country (CbC) Reporting.HMRC have published an update in the International Exchange of Information Manual (IEIM 800000) concerning reasonable excuse in the context of CbC reporting. This says: 'The CbC report filing deadline will depend on the financial year end of the filing entity. HMRC recognises that the impact of COVID-19 may mean that businesses will not be able to meet their filing deadline. HMRC accepts that any business that is unable to file a CbC report by the deadline because of these difficulties, will have a reasonable excuse and therefore not be liable to a penalty for late filing. This will remain the case provided the CbC report is filed without unreasonable delay following the resolution of the difficulties.
Will the deadline for a Senior Accounting Officer (SAO) to provide a certificate to HMRC after the end of a financial year of a qualifying company be relaxed or extended? (Usually, the SAO must give HMRC the certificate before the end of the period that the company has after the end of its financial year for filing its accounts with Companies House or at any later time as allowed by HMRC.)HMRC has responded as follows: 'we believe that if an extension is granted by Companies House for the filing of accounts with Companies House then that extension will therefore also apply to the tax returns, otherwise HMRC expect the usual time-limits will apply'.