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Warning To Freelance Contractors - Rises In HMRC Late Filing Penalties

By: Ray Whitfield

Posted On: Apr 4th, 2011  Under: Contractor Tax, Freelance Contractors, HMRC, Contractor Limited Company

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Self-employed contractors who handle their own tax affairs will need to be extra vigilant when filing their next self-assessment tax returns: HMRC has just announced that its £100 late filing penalty is to be hiked substantially.

The current penalty is considered as too feeble to act as a deterrent.  New information on the revised fines will be shortly be sent out with the 2010/11 self-assessment notices.  Any limited company contractor who files and pays six months late will now face a stinging £1,300 penalty.

HMRC spokesman Stephen Banyard said that the vast majority of people will be unaffected by the changes because they file promptly.  However, he added, a small number of people avoid filing or paying on time, causing HMRC to get involved in unnecessary and time consuming work in pursuing them.  The new penalties, he added, would increase over time and will serve to encourage people to get their self-assessment returns in on time; “Basically, the greater the delay, the greater the penalty.”

The new penalties mean an initial fine of £100 (even if there is no tax to pay), with a charge of £10 per day for every subsequent day’s delay.  By the end of three months, the fiscally slapdash freelance contractor will owe £900 in penalties.  However, things will get worse: delays of up to six months will attract charges of 5 per cent of tax due or £300, whichever is the greater of the two amounts, as will delays of twelve months.  In serious cases, the penalty can rise to 100 per cent of the due tax - and that is on top of interest charges on the outstanding amount.

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