Last-minute panic over 3m late tax returns

NEARLY THREE million people could face fines for failing to file their tax returns by 31 January. With just seven days to go before the self-assessment deadline, one in three of the 9.1 million forms issued by Inland Revenue has yet to be submitted.

There is an automatic pounds 100 fine for not sending back completed returns by 31 January. And many people who do get their form back just before the deadline will still be fined pounds 100 - because it has been filled in incorrectly or they have forgotten to sign it.

The Revenue expects accountants and tax advisers to deliver millions of tax returns this week and will be opening some of its tax offices next weekend to receive hand-delivered paperwork and cheques.

Last year, 670,000 people missed the deadline, and 373,000 of those forms are still missing, creating a shortfall of pounds 74.6m in unpaid fines, plus untold interest on unpaid taxes.

Although the January rush to return tax forms has always created chaos, accountants and task advisers believe it has got worse since self-assessment was introduced in 1997 with the aim of simplifying taxpayers' calculation of their bills.

Taxpayers can still ask the Revenue to work out their bill but it guarantees to do so only for those who returned their forms before the end of September the previous year. But millions of people were unaware of the earlier deadline.

Jonathan Bruce, operations director at the personal tax centre of the accountants Ernst & Young, said: "The last minute panic has got worse, if anything. Before self-assessment there was a fine for returning the form late but it was almost never enforced as the Revenue had to launch an investigation first."

The turmoil is good news for accountants. Mr Bruce says: "There are people here until 11pm and at weekends. There's quite a Dunkirk spirit." Last year members of his team held last-minute meetings with clients in motorway service stations to exchange paperwork and sign cheques. This year they expect to use courier services to speed up the process.

American-style tax advice shops have also started capitalising on the inefficiency of the British taxpayer. These shops, which have sprung up across the country, will help with tax returns and undercut accountants' fees. For a flat rate, sometimes as little as pounds 75, they will fill in the form and work out the bill. Tax Team, a subsidiary of a giant US tax return service, now has 28 offices on British high streets. Last week, each branch was processing at least 100 tax forms a day.

Tax Team's UK head, Gerry Hart, says the last-minute panic is partly because of generous deadlines. Forms due next week were sent out last April and many people have forgotten about them. "We are helping the sort of person who gets a red demand from the Inland Revenue and then realises they have not got long," he said.

Personal finance, section 2