It’s never too early to start thinking about the 2010/11 tax year and the 31 January deadline for tax returns that seems to creep up on us faster and faster each year.

Last month the government extended the penalty regime for late filing of the Self Assessment Tax Return (SATR).

Therefore, to avoid unnecessary penalties and the potential distraction this could cause partners, firms will need to help ensure in the run-up to 31 January 2012 that all their partners meet this annual personal tax return filing deadline.

Previously, if a partner submitted his or her SATR after 31 January, he/she was charged a penalty of £100 – except in cases where the tax due had been fully paid by 31 January.

For the 2010/11 SATR, however, late filers could face significantly higher penalties without the prospect for mitigation where the tax itself had been paid on time.

The new penalties outlined by HMRC will be as follows:

  • One day late: An automatic penalty of £100 if the tax return is filed one day late (i.e after 31 January 2012 if filed electronically).
  • Three months late: A daily penalty thereafter of £10 a day accumulates until the return is filed (up to a maximum of £900).
  • Six months late: Additional penalty being the higher of 5% of the tax liability or £300 (again, even if the tax was fully paid on the due date).
  • Twelve months late: A yet further penalty, again being the higher of 5% of the tax liability due or £300.

Taking all of this into account, a partner who files his or her tax return more than six months late, for example, would be charged a penalty of at least £1,300.

But that’s not all – the penalties outlined above are in addition to, and on top of, the interest and surcharges HMRC will charge the partner on any tax outstanding at the due date.

It’s certainly in the best interests of all firms to make sure those responsible for the preparation of tax returns identify historic ‘late filers’ internally and ensure that they are forewarned of the changes to the regime so that they are compliant this time around.

Louis Baker is head of professional practices group at Crowe Clark Whitehill