Individuals who have not yet filed their 2014/15 self assessment tax returns need to do so by 31 January or face an automatic £100 penalty. However, taxpayers who have a genuine reason why they cannot file their tax return on time, such as those affected by floods, can contact HMRC to seek an extension without penalty.

Nimesh Shah, partner at Blick Rothenberg, said: ‘HMRC is able to cancel the penalty at their discretion if the taxpayer can offer a reasonable excuse as to why they didn’t file their tax return by the deadline.  But, the question is what do HMRC accept as a reasonable excuse?’

Reasonable excuse is not specifically defined in law and a HMRC officer would look at each case on its own facts. The most common examples can include serious illness, a family bereavement or damaged records because of flood damage. Following the recent storms, HMRC has set up a dedicated telephone hotline for those affected by flooding.

Blick Rothenberg says it is rare for HMRC to extend the filing deadline under reasonable excuse and the firm warns that the burden of proof is with the taxpayer to demonstrate that they took all steps to file their tax return on time.

Shah said: ‘It would be unwise to rely solely on HMRC’s supposed relaxed discretion and taxpayers should aim to file their return by the deadline as the penalties can rack up quickly if issued.’

Failure to file a tax return by 31 January results in an automatic fixed penalty of £100.  If the tax return is three months late, HMRC will start charging daily penalties of £10 per day and these run for a period of up to 90 days. After six months, HMRC will charge a penalty of 5% of the person’s tax or £300, whichever is higher.

Shad said: ‘Within 6 months, you could be facing total penalties of at least £1,300. The penalties start to become even more serious if your tax return is more than 12 months late and can be as much as 200% of the tax. HMRC will charge these penalties even if you don’t actually have any tax to pay.’

In addition, 31 January is also the date people need to pay any tax they owe to HMRC for the 2014/15 tax year. If payment is not made on time, HMRC will charge daily interest at 3%.  If the tax remains unpaid by 2 March, HMRC will charge a penalty of 5% of the tax and further 5% penalties are levied if the tax is unpaid at six months and 12 months.

Shad said: ‘If someone doesn’t file their tax return until 1 June and they calculate they have to tax to pay of £1,000, they could be facing an additional bill of penalties and interest of just less than £500, which is nearly as half as much of the tax owed in the first place.’

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