Further to our article of 6 January announcing the easement of penalties for 2020/21 tax returns filed after 31 January 2022 but by 28 February 2022, we have received some further detail from HMRC on a number of aspects of this measure.
Tax Credits customers
In their original press release, HMRC said that tax credit claimants filing late “should report the figure as soon as possible after 31 January. In most cases HMRC will update the income used to calculate finalised entitlement to tax credits if the delay is due to the impact of COVID-19”.
Members had raised a number of queries about this statement and HMRC have now provided further detail as follows:
“Customers are still encouraged to make their declarations by 31 January; if that is not possible tax credits will be finalised on the basis of the information HMRC holds at the time; if a declaration is made after that, and by 28 February, we will use discretionary powers to re-make the decision if the delay was due to Covid. We will not be expecting customers to prove the delay was due to Covid.”
We understand that any actual figures reported after 31 January 2022 will need to be reported by phone (0345 300 3900) and not via the online system.
Class 2 NICs
Late payment of Class 2 (i.e. after 31 January 2022), can cause issues for individuals who want to claim contributory benefits which depend on their 2020/21 NIC record being complete, and also for those who want to pay Class 2 voluntarily. HMRC have provided some further commentary below:
"Self- employed taxpayers who need to claim certain contributory benefits soon after 31 January 2022 need to ensure their annual Class 2 National Insurance Contributions (NICs) are paid on time. This is to make sure their claims are unaffected. Class 2 NICs are included in the 2020/21 Balancing Payment that is due to be paid by 31 January 2022. Benefit entitlements may be affected if they:
- Can’t pay their Balancing Payment by 31 January 2022, and
- Enter into a Time to Pay arrangement to pay off the Balancing Payment and other Self-Assessment tax liabilities through instalments.
"Affected taxpayers should contact HMRC on 0300 200 3822 for help as soon as possible."
In respect of taxpayers who wish to make voluntary payments of Class 2, late payment can cause problems, with amounts being refunded and not transferred to the NIC record. HMRC has said that is it too late to amend thesystems to make automatic transfers of late-paid, voluntary Class 2 payments but they will be updating GOV.UK to advise customers of the issue and the action they need to take. As in 2021, HMRC will also take steps to identify, and contact affected customers after 28 February. Otherwise,
- Self- employed taxpayers who have profits below £6,475 in the 2020/21 tax year and want to pay voluntary Class 2 NICs for Contributory Benefit after 31 January 2022, or
- Taxpayers who have paid voluntary Class 2 NICs via Self-Assessment before 31 January 2022 but not filed their return until after 31 January
Will need to contact HMRC on 0300 200 3500 for assistance.
Members may also find our articles on the interaction of Class 2 NIC and self-assessment and voluntary class 2 issues which arose last year, helpful as providing further background and context on the issue.
Covid and reasonable excuse
A number of members have queried with us whether or not any covid-related issues they might experience which affects the filing of client returns would constitute a 'reasonable excuse' if they need to appeal any penalties. HMRC have provided the following update which members may find helpful.
“If a taxpayer has taken all reasonable steps to get their affairs in order to allow their agent to meet the filing deadline, and that agent has been delayed due to covid, then the agent delay may constitute a reasonable excuse.”
Last year a bulk appeal process was introduced to allow agents to appeal against penalties for up to 25 clients at a time. We understand that HMRC are considering whether updates to guidance and other easements, such as the bulk appeals process, are needed as the situation develops.
Further comments from HMRC
HMRC have also provided the following additional information:
Does the payment easement also apply to SA700 / SA970 customers too?
Yes. The deadline for submitting and paying for these SA customers is 31/01/22. The LPP easement is based on a payment date of 31 January and not the type of SA return.
Daily late filing penalties reminders
Last year, due to a technical issue, we did not issue the usual daily late filing penalties reminders in June and July. We plan to issue the reminders this year. There is, of course, a warning about the daily penalties on the initial late filing penalty notice.
Partnership returns SA800S
We can confirm that individual partners will not be charged a late filing penalty in respect of a 2020/21 partnership return (SA800) provided that the partnership return is filed online on or before 28 February.
Deadline for nominating accounts for the special mixed fund rules
We can confirm that for 2022, the deadline for nominations of special mixed funds has been moved to 28 February.