An estimated 12 million tax returns are due to be submitted to HMRC by the 31 January 2021 deadline.

But as of last week, five million were still outstanding. And with many people struggling financially as a result of the ongoing coronavirus pandemic, filing a tax return and paying any tax owed for the previous 2019/20 tax year may not be a priority.

Usually, late filers are hit with an automatic £100 fine and penalties accrue the longer it takes someone to submit their tax return.

While the automatic £100 late filing penalty will still be applied, HMRC has confirmed that under its ‘reasonable excuse policy’, anyone with a valid coronavirus excuse can appeal the fine, which if accepted, may help them avoid the £100 penalty.

This may include spending time home schooling children or having time off due to being ill with the virus, but HMRC will decide on a case-by-case basis.

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An HMRC spokesperson, said: “We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of Covid-19 we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that.

“Support is in place for those who may struggle to pay with customers able to spread their payment liabilities of up to £30,000 over 12 months.”

After three months, additional penalties of £10 per day may be charged, up to a maximum of £900. After six months, a further penalty of 5% of the tax due or £300, whichever is greater. After 12 months, another 5% or £300 charge is applied, whichever is greater.

There are also additional penalties for paying late of 5% of the tax unpaid at 30 days, six months and 12 months. Interest will be charged on all late payments. HMRC added these will still be applied, but if people have a legitimate excuse, they can appeal these other, later fines.

File returns on time or face future problems

HMRC urges those who can to file on time and accountancy firm Blick Rothenberg added there could be wider implications for personal tax affairs for those who miss the deadline.

Nimesh Shah, CEO at the firm said: “The £100 late filing penalty is relatively modest, but people should think very carefully before deciding to file their tax return late.

“HMRC suggests late filers who receive the automatic £100 fine can appeal it and it will be dismissed. However, it will take time to appeal and it is never guaranteed that HMRC will accept the appeal, despite its apparent show of sympathy.

“In addition, HMRC will inevitably be inundated with appeals so it could be several months before the penalty is reversed.”

Nimesh added: “It is positive that HMRC acknowledge the immense challenges of home schooling under the latest lockdown, and that parents will be very time constrained in January to file their tax return – I doubt we will see such sympathy from HMRC ever again. In normal times, they would only accept situations of severe hardship as a ‘reasonable excuse’ to avoid the late filing penalty. In the past, HMRC have cited examples of ‘reasonable excuse’ as including bereavement of a close relative or serious illness which prevented you from filing your return on time.

“If you can find the time between work and teaching, I would encourage people to file their tax return by 31 January.

“I think there is a lot to be said for ‘good taxpayer behaviour’ by filing your return on time – if you have a HMRC issue in the future, they can look at your past filing and payment history and a clean record can hold some weight.”

Deadline extension?

According to a report in The Sunday Times, the chancellor, Rishi Sunak, is also considering whether to extend the deadline for everyone from 31 January to March.