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Time to act quickly on a missed tax deadline
With more than a million people missing the recent deadline to file self-assessment tax returns, Amy Mehers, Director and Head of Personal Insolvency at Leonard Curtis, looks at some of the reasons why, and what can be done now
We now know that 1.1 million people missed the deadline to file self-assessment tax returns last week and face an initial fixed penalty of £100.
This applies even if they were not due to pay any tax, and the fine rises if the return has still not been filed after three months, then again after six and 12 months.
So why are people defaulting? In my 19 years’ experience in managing personal insolvencies, we have seen plenty of reasons why people miss this deadline.
It may well be that clients are simply not able to pay the tax due, or that the additional tax liability, coupled with other commitments, have put them in a challenging financial position.
Occasionally it could be a historic issue or more recently we are seeing a number of people making investments in crypto currency without realising the potential tax implications. We have also seen crypto scams resulting in people not having the funds to pay their tax bill.
Whatever the reason, non-compliance is taken very seriously by HMRC. Not just because the tax owing is not paid, but because they view it as an indication of an attitude which is likely to result in non-payment and possible tax avoidance in the future.
To be under this sort of suspicion is not good news for non-payers as it not only results in penalties and interest, but it can also often create problems if you want to raise finance at a later stage. Full historic tax compliance is now a ship sailed for many people. However, there are things you can do to get some tailored plans in place and regain control.
- Understand the full extent of the problem
A full understanding of the position will ensure that the tax liability can be accurately quantified.
When a negotiation arises to agree the level of liability, or seek any flexibility regarding settlement, the client will need to give a credible explanation of their problems and the steps that can be taken to resolve them. After establishing the facts, a bespoke action plan can be developed to tackle the issues and specialist support secured to assist with the process.
- Determine if the tax can be paid and how
A comprehensive assessment of the client’s financial position and potential sources of funding is required to determine payment prospects. Access to specialist advice is valuable to ensure that all potential funding options are explored to deal with a settlement.
We develop structured deals in line with HMRC’s requirements swiftly and effectively, managing what is a difficult and stressful situation for clients. There are often many possible solutions to issues of financial distress, and it is important that a tailored approach is developed.
- Determine other debts and financial issues and reasons why
Preparing to file self-assessment tax returns often brings to light other types of liability, including credit cards, loans and personal guarantees that crystallise when businesses fail, or payments are missed. Key causes of financial difficulty tend to come from divorce or business failure. For clients with tax liabilities, it is unlikely that this is their only debt.
For some clients who have experienced or are experiencing corporate failure, personal guarantees will come into play. In addition, the client may have an overdrawn director’s loan account and, as well as having to defer tax, difficult financial situations are often exacerbated by taking out personal credit lines to support the company.
- Take control now
The key to dealing successfully with outstanding liabilities is transparency and recognition of the issues. Difficult decisions are made at the outset, to provide the client with reassurance and certainty and help them and their advisers to take control of their financial distress and implement a plan to resolve it.
Amy Mehers from Leonard Curtis specialises in assisting individuals to review their options and achieve a solution to their personal financial position in an orderly and protected manner.
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Reach Commercial Finance Limited. Registered in England no 09056450. Leonard Curtis is a trading style of Reach Commercial Finance Limited. Leonard Curtis is a broker not a lender and is independent with access to the whole of market. We may receive commissions that will vary depending on the lender, product or other permissible factors. The nature of any commission model will be confirmed to you before you proceed. Authorised and regulated by the Financial Conduct Authority FCA no. 753686. Registered with the Information Commissioner’s Office reference ZA069234
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