Submitting your self-assessment tax return late automatically triggers a penalty. But if you don’t have all the data you need to complete the return by the deadline how can you avoid being fined?
According to HMRC, every year around 40% of personal self-assessment returns are submitted in the last month before the deadline. Starting to prepare your return at the eleventh hour is OK, but it does mean that if you then find you haven’t got all the data you’re in risk of missing the deadline, which will mean a fine of £100 (just for starters) unless you can convince HMRC you have a reasonable excuse. Unfortunately, the get-out clause that allowed you to escape the penalty by paying the tax you owed by the deadline was scrapped several years ago.
Research shows that one of the main reasons people miss the deadline is because they can’t find all the information they need to complete their self-assessment (SA) return. But actually there’s no reason for this to cause a problem. Whether it’s a matter of not being able to lay your hands on a document containing the details of income or expenditure or not having records at all, there’s a solution.
Process now, check later
HMRC operates the SA system on a “process now, check later” basis. This means it will crunch the numbers you declare, estimated or not, and if necessary check them for correctness later. So if you’re short of a figure or two for your form, don’t panic, there are two options: declare an estimated or provisional figure.
When to use an estimate
If you won’t ever be able to find the exact figure to report, e.g. you paid an odd job man in cash for work on your rental property but didn’t keep a record, simply use your best judgement to estimate the figure to report.
Trap. HMRC gives confusing advice on whether you should tell it that you have used an estimated figure by ticking a special box on the tax return. Our advice is only do this where you expect to amend the estimate later.
Tip. Keep a record of how you arrived at your estimate; this will help you if HMRC enquires into your tax return. For example, say you estimate the figure for gift aid payments you made. When working out the estimate keep a list of the charities you recall donating to and the amounts. Don’t just put in a round sum and hope for the best.
When to use a provisional figure
Where you estimate a figure because you don’t have the paperwork etc. at the time you complete your return, but expect to have it later, you should tick the provisional or estimated figure box. Once again, keep a record of how you arrived at the provisional figure. This might simply be your best guess; nevertheless write your reasoning down and keep it with your tax records.
Tip. When you decide whether or not your provisional figure was correct you must notify HMRC. If you don’t it won’t know whether to accept the figure as final and this might lead to an enquiry into your tax return.
We’d obviously encourage you to get your tax return done well before the deadline (especially if we’re doing it!) but if circumstances don’t permit there is the above you can take advantage of and avoid a penalty.