There are lots of reasons why the taxpayer or their agent might be unable to finalise a return by 31 January 2021. In normal years it might be because information has been lost but this year information may be inaccessible. We have heard that COVID-19 restrictions or the health concerns of either the client or agent have prevented home visits to collect data from clients who struggle to assemble what is relevant themselves.

Another problem for agents this year has been the volume of COVID-19 related work, and we understand that some firms are behind where they would usually be in terms of their compliance work.

We have raised concerns with HMRC about the 31 January deadline and whether there could be any concessions in respect of penalties for late filing due to COVID-19 pressures. (We have not asked for a deferral of the 31 January 2021 Self-Assessment filing deadline itself because this would be significantly more complex and many members have expressed strong views against such a move.)

HMRC have already confirmed that they will give consideration to COVID-19 factors as the grounds for a reasonable excuse for missing filing dates. Taxpayers should explain how they were affected by COVID-19 when making their appeal, as well as making the return or payment as soon as they can. We are still exploring whether there might be any leeway in terms of issuing penalties for failure to file on time, or with agents and taxpayers using provisional or estimated figures in order to meet the deadlines.

In the absence of any COVID-19 specific guidance from HMRC, the following is a review of the current position regarding the use of estimated or provisional figures.

Estimated or provisional?

There is a difference between a provisional figure – which means that the intention is to revise it at a later date – and an estimated figure, which is a best and final guess with no intention to update the return later.

In practice, the word estimated probably gets used for both situations, but where agents are unable to access all the information, or are under pressure and struggling to get through returns, it is most likely that provisional is the more appropriate term.

Provisional figures  

Taxpayers should not leave boxes on their return blank because they do not have the necessary information. If they do, HMRC will view the return as incomplete and inaccurate and could charge penalties.

Including provisional figures on a return is one way to address a lack of information, but HMRC do expect the taxpayer to make their best efforts to establish the actual figures before resorting to the use of provisional figures. HMRC may charge penalties if they consider that there was not a good reason for using the provisional figure or if the amount used was not reasonable.

We would expect that the inability to access some data from a shielding/vulnerable taxpayer where a home visit would be usual should be accepted as a good reason for including provisional figures. However, HMRC may not look as kindly on a blanket submission of a number of provisional returns late in January because the agent was behind with their work. Where provisional items are included, the white space disclosure should indicate that it is client specific. 

Where any of the figures on the return are provisional then box 20 on the SA100 should be marked with an ‘x’ to make HMRC aware of the fact. It is also necessary to make a note in the ‘Any other information’ box (also known as the ‘white space’) as to why provisional figures have been used and when the final figure is expected to be available. 

Updating provisional figures

Final figures should be provided to HMRC as soon as possible. The usual statutory provisions for amendments apply, with taxpayers having 12 months to amend from the normal filing date – which will be 31 January 2022 in most cases. However, replacement of any provisional figure with the final figure at the earliest opportunity is likely to be the best policy.

Where it turns out that the provisional figure is, in fact, the final figure, then the return only needs to be amended to remove the ‘x’ in box 20 and any disclosure in the white space.

Consequences of a provisional return

Making an amendment to the return will extend the enquiry window into that aspect of the return.  

If a provisional return is not revised by the time the enquiry window for HMRC is closing, then this may well increase the risk of HMRC selecting it for an enquiry.

If a return including provisional figures shows that a refund is due, then HMRC will withhold the refund until final figures are provided.

Tax credits

Where tax credits are involved, use of provisional figures should generally be avoided. Where an estimate of income was provided by 31 July 2020 deadline,  final figures for the 2019/20 claim year will be needed by 31 January 2021.  If final figures are not provided by that date, the claim will be automatically finalised on the previously provided estimated figures. Once awards have been finalised, they can only be amended in limited circumstances, for example via appeal or if HMRC open an enquiry. 

HMRC are aware that in some exceptional circumstances, as a result of coronavirus it may not be possible to meet the 31 January deadline. In these cases, the individual will have to call HMRC and explain why the deadline has been missed. If HMRC accept the explanation, they can use their tax credit enquiry powers to make the necessary amendments and issue an updated final award.

Estimated figures

Estimated figures are used when actual figures are not available and the estimated figures are intended to be final. This might be necessary where records have been lost, or where a valuation has been used.

In these cases, following changes to HMRC guidance in 2018/19, it is not necessary to tick box 20 of SA100, but it is necessary to add a note to the ‘Any other information’ (white space) box to explain why an estimate has been provided.

Other consequences

Where the agent provides fee protection insurance to cover the costs of enquiry into client’s returns, this can be invalidated when a return is submitted after the relevant deadline. Agents should check their policy if the decision is made to submit late, rather than use provisional figures. Agents should also check the terms and conditions of their specific policy to see what the position is for the submission of provisional or estimated figures because both can increase the risk of enquiry. 

HMRC guidance

HMRC have published guidance on the use of provisional figures at SALF206.