ICAS proposes three-month waiver for late filing penalties

ICAS has written to HMRC seeking a three-month waiver of the penalties for failure to meet tax filing deadlines, highlighting the impact of Covid-19 disruption on firms and their clients

ICAS is calling for any such waiver to be automatic and not require an appeal because the costs of doing so in terms of agents’ time would outweigh the saving of a £100 penalty.

The Scottish institute makes its case in a letter to Jim Harra, HMRC CEO, which points out that while the build up to 31 January is always a peak period of work, this year the pressures have been compounded by the coronavirus pandemic.

ICAS said that when coronavirus struck, some clients stopped sending in their accounts as office-based finance staff were furloughed or required to work from home, and business leaders’ time has been focused on their own workforce and responding to the significant operating challenges and restrictions affecting their business, rather than in providing the information required for tax returns.

Accountancy and tax agent firms have also had to transfer to work from home with all the associated pressures that this brings to staff as well as practical difficulties in accessing information and IT systems and difficulties in making the transition to new ways of working.

In many smaller firms staff who prepare tax returns are busy  assisting their clients with coronavirus job retention scheme (CJRS) and self-employed income support scheme (SEISS) claims; these have often occupied significant amounts of time for those who assist with payroll preparation, where pay periods and variable hours have to be considered on an employee by employee basis.

ICAS said many accounting staff are already working long hours and their senior partners are concerned that they cannot be asked to do even longer hours, when many have families at home more than in pre pandemic times.

Additional lockdown periods have worsened the situation, with some larger firms reporting to ICAS that they have been approached to take on work by smaller firms which have run out of capacity.

ICAS also highlighted challenges in relation to corporation tax. Companies House extending the filing deadlines by three months has meant that clients are now working to this deadline, so information for tax returns is not always available on a timely basis, while  the greatly increased questions around whether businesses remain ‘going concerns’ can also cause delays to sign off on audited accounts which are the basis for the corporation tax returns.

As a result, ICAS said some firms report being significantly behind compared to prior years in the number of tax returns progressed or completed.

The institute said making an individual appeal in each late filing case is neither feasible nor an efficient use of taxpayers, agents or HMRC’s time.

Instead, it seeks assurance from HMRC that it will accept that agent pressures of work in these trying circumstances of the pandemic will be accepted this year as a ‘reasonable excuse’ for late filing, given that many businesses are also seeking help from agent firms regarding changes arising from Brexit.

Bruce Cartwright, ICAS chief executive, said: ‘Accountancy and tax agent firms are operating under great stress and are the unsung heroes of implementing the CJRS and SEISS and for enabling the Chancellor’s schemes to keep many employees and businesses going in these extraordinary times. ‘Such firms are caught in the middle between HMRC and their clients and facing difficulties due to coronavirus.

‘We would like HMRC to announce that penalties will be waived for up to any three-month delay in an annual tax return filing for those returns due between now and 30 June 2021.’

Further reading:

ICAS letter to HMRC

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