2,700 tax returns were filed on Christmas day. I wonder which people find it more satisfying to do a tax return than to enjoy the seasonal delights.
The vast majority of taxpayers do not find filing returns a congenial exercise. Human nature being what it is, most people will put the task off as long as they can. Hence, the need for deadlines and the SATR 31 January deadline has been a well-publicised one for nearly a quarter of a century. In that time the fine for missing the deadline has not changed from £100. However, every year more than half a million taxpayers miss the deadline.
The government has tried to encourage compliance with imaginative advertising campaigns. The first ones featured Hector the inspector, a much-loved figure for cartoonists and advisers. After he retired, we had all sorts of interesting campaigns. My favourite featured people doing yoga and finding their inner peace having filed their tax returns early.
Every year, lobby groups come up with an excuse as to why the deadline should be waived; floods, foot-and-mouth, Brexit, snow in January! And, this year, covid. But I do wonder whether leniency over deadlines is actually a false friend. I divide my clients into three categories: those who are unbelievably efficient Ed’s; conscientious Corinna’s and last-minute Larry’s.
The efficient Ed produces almost all his information before the end of the tax year. He sends the information to 15 March and sends the statements for the final fortnight on 6 April. I have his returns filed by Saint George’s day.
Corinna, who aims to produce information in a timely manner, studiously collects all the end of year tax documents that she receives and sends all the information by 15 July.
Finally, last-minute Larry wakes up to the task, despite lots of prodding, in the middle of January. Desperately he seeks duplicate statements that were originally sent to him in May which he has now lost. Without any deadline, Larry would fall into a tax hole of gaping proportions where unfiled returns and unpaid taxes and brown envelopes from HMRC will bury him.
When you do finally file the return, Larry always resolves that next year will be better; but this is a New Year’s resolution that is rarely kept.
So, I’m nervous about deadlines being extended. Like eating chocolates, the short-term gain often leads to long-term pain. Moreover, the ten months given to file the UK return is generous by international standards. It’s enough time for Larry to lose all his documents. In addition, the self-assessment system has benefited from incremental improvements over the past 24 years. I remember when one stayed up to 2am to find the bandwidth to file the returns. Now the system works admirably well for almost all taxpayers.
The timeframe is in stark contrast to other penalty-based deadlines, as they bear little relationship to the complexity of the task. For example, the requirement to report and pay the tax on a capital gain on residential property within 30 days of completion is unreasonably short, given the requirements for information on probate values, 1982 values, acquisition costs, improvement expenditure and disposal expenditure to arrive at an accurate computation.
Efficient Ed will have had the documentation prepared before he has even exchanged contracts. You have no chance with Larry. But even conscientious Corinna, whom I take as my benchmark, may find the 30-day deadline challenging.
We are becoming more used to real-time information being required as a result of operating payrolls and of course MTD. However, HMRC has now gone further than RTI and has required large companies to pay tax on profits before they even make them. A company with a December year end now has to pay its final instalment of CT on 14 December. Perhaps large companies should employ Mystic Meg in their tax department!
It is time for a review of deadlines to see which ones are frankly unreasonable and which ones may be too generous. The hotchpotch of different time limits and penalties needs to be made more logical so that the tax system functions for the benefit of conscientious taxpayers.