Have you missed the tax deadline?

You've missed the 31 January deadline to file your tax return. So what do you do now? Sheena Sullivan, tax partner at accountants Pannell Kerr Forster, has some advice: "Although the official deadline is 31 January the Inland Revenue has stated that taxpayers will not be penalised if their return is in the tax office post box by 7.30 am on 2 February.

You've missed the 31 January deadline to file your tax return. So what do you do now? Sheena Sullivan, tax partner at accountants Pannell Kerr Forster, has some advice: "Although the official deadline is 31 January the Inland Revenue has stated that taxpayers will not be penalised if their return is in the tax office post box by 7.30 am on 2 February.

"This might appeal to people who like to live dangerously but I think they will come unstuck if they cannot prove their return was already in the post box when the tax man was tucking in to his breakfast cereal.

"If you are being held up from filing your return because you are waiting for a piece of information then make an educated guess and qualify your return by stating that it is provisional. At least they will know that you are on the case. Don't bury your head in the sand. The Inland Revenue is not going to go away so the sooner you get your return sorted, the better. If you have really mucked it up this year then a lesson for next year is to start preparing now.

"Some people will have the added complication of having to pay the balance on their tax liability for last year on 31 January whilst also having to pay their first instalment for this year. This may create a cashflow crisis for those who haven't been prudent and put some money aside. If you are late in paying your tax and you miss the deadline for your return you can face both an interest and penalty charge."

Martin Kaye, senior tax partner, BDO Stoy Hayward, has some further options if people just don't have the cash to pay tax on 31 January. Mr Kaye says there are three key issues:

Interest on late paid tax

If someone files a return but doesn't pay the tax, they will have interest to pay, plus a surcharge of 5 per cent if tax is unpaid at 28 February 2000 and another 5 per cent if it remains unpaid at 31 July 2000.

Collection proceedings

The Revenue computer will churn out regular statements of account showing the outstanding tax and accrued interest. After a while the debt will be referred to the local Inland Revenue Collection office which may telephone the individual to pursue the debt or turn up at the taxpayer's home but this is unlikely if telephone contact has been made.

"Time to pay" arrangements can usually be arranged over a couple of months or so without much difficulty. If the individual is a habitual late payer or wants longer-term credit there will be other hoops to jump through.

Tax unpaid and return not filed

Late-filers should also be aware that they run a significantly higher prospect of their tax return being selected for enquiry, which might even lead to additional tax (and interest).

If the Revenue does not get a return at all, it will not be able to collect any tax unless it makes a "determination". The computer will, however, automatically charge the late filing penalty of £100.

The determination is similar to an old style estimated tax assessment. Experience suggests that the Revenue will not usually make a determination until August though there is nothing to prevent it from doing so earlier. There is no appeal against the tax shown as due by the determination so it must be paid or revised by filing the tax return.

Mr Kaye concludes: "We would never encourage clients to do other than file their returns. However, in practice, if someone is prepared to pay interest, a fine of £100, a 5 per cent surcharge and risk a detailed enquiry into their return they can probably defer payment by not filing until July.

"If they are ready to pay a further 5 per cent and £100 fine they can defer filing longer but they can expect to be hit with a determination soon after the end of July. The inevitable Inland Revenue enquiry will no doubt follow thereafter."

Time is running out for the millions of taxpayers who have yet to return their forms. Yet, says Mr Kaye, many pensioners are struggling unnecessarily with self assessment when they do not need to be in the system in the first place.

Mr Kaye says: "Many pensioners are included into the system purely because they are due repayments from the Inland Revenue every year. If this is the case, they can opt out of the self assessment system. Instead, they will receive a much simpler, four page tax repayment form to complete."

For those of you who are still hoping to beat the deadline, Mr Kaye gives some last-minute tips in filling out the forms.

Do you have all the pages you need? If, for example, you receive income from property lettings you need special supplementary pages, called the land and property pages. You can order any missing pages by telephoning 0645 000 404.

Missing paperwork? Request written details from the organisation or it might give you figures over the telephone. Failing this, put an estimated figure on your tax return and tick box 22.3 explaining which figure is an estimate. Also, state why you could not give the final figure and when you expect to be able to supply it.

Box clever. Some parts of the form need extra care when deciding what to show. Mistakes are commonly made with regard to pension contributions as an employee. Remember to enter the gross rather than the actual payment otherwise you could lose out on valuable tax relief. Also remember that if you are domiciled outside of the UK, you may still need to show any overseas employment earnings even if they are non taxable.

Reduce the risk of an Inland Revenue enquiry. Explain anything that may draw the Inland Revenue's attention such as judgements, new sources of income or a drop in income in the white spaces provided. If you have made a claim for tax relief but are uncertain whether you are eligible, give brief details.

Think about your cash flow. Many taxpayers must make the final payment on last year's tax bill as well as an advance instalment on this year's bill on 31 January. Make sure some money is set aside.

Martin Kaye adds: "As the deadline approaches, most people turn to professionals because of the complexities of the form and personal time constraints. The main advantage of advisers, however, is that they can identify potential tax savings, helping you to reduce your tax bills."

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