HMRC owed £1.6bn from late payments

HMRC owed £1.6bn from late payments

The taxman is owed £1.6bn from self-assessment tax payers who are late making payments so far in the 2017/18 tax year.

The deadline to pay was Jan 31, 2019 but HMRC has not received all of the tax returns for the relevant tax year, so the number is expected to rise and could surpass the £1.83bn that was paid late in the previous tax year.

A representative of HMRC said the number of self-assessment tax payers had risen in recent years and this may account for the increase in late payments.

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The representative added: “We want people to pay on time rather than receive penalties. If customers are unable to pay on time, they may avoid penalties by contacting HMRC as soon as possible and we can discuss whether it might be possible to set up a payment plan.”

The data was first reported by FTAdviser's sister title the Financial Times.

Jackie Hall, tax partner at RSM said the increase in the number of self-assessment taxpayers had been accompanied by a rise in the number of taxpayers who don’t understand the system and so file late.

She told FTAdviser: “Newly self employed individuals do not always fully understand, or are not advised of, how the self-assessment tax system works.

"New self-employed individuals making profits in their first year will find themselves paying out not just the tax on their first year profits but also a payment on account of the tax estimated to be payable in their second year based on those profits, all on the 31 January following the year of commencement of trade.

"In addition if trade commences part way through a tax year the individual may suffer tax on some profits twice in the early years, though relief on these overlap profits will be given on a subsequent change of accounting date or on cessation of the trade.

"Lack of understanding of this can lead to unexpectedly large tax bills in the early years for which the individual hasn’t planned and does not have the funds to pay for. So if HMRC’s assertion is correct that there are more self-assessment tax payers this could indeed be a factor.” 

She added that late payments may also be the result of a slowdown in the economy, and the policy of HMRC no longer accepting payments made by personal credit card. 2018 was the first calendar year in which this applied.

HMRC can no longer take payments in this way because, under EU law, it can no longer charge customers for taking credit card payments, so now refuses to do so.

FTAdviser understands that credit card payments accounted for 0.8 per cent of the number of payments to the taxman, though this is by total percentage of payments and not just self assessment payments. 

Company and corporate credit cards can still be used to pay a tax bill, as can personal debit cards.