penalties for not filing return, alhough no tax is due

[uncle john]

Good afternoon

I'm trying to help a friend, who although he clearly has no tax to pay, might be liable for failure to notify penalties, which look quite fierce.

The background is:
a) He used to be on PAYE, and has a UTR.
b) He stopped full time work some years ago. In 2020-21, he began working self employed, but earned well under £1,000 in both 2020-21 and 2021-22.
He also gets about £2,500 pa in dividend income.
c) In 2022-23, he earned about £3,000, again with dividends of about £2,500.
d) Because his total income is well below his personal allowance, he did not think that any reporting was necessary.

He's recently read that he might be liable for penalties for not registering as self-employed, and for not submitting a return for 2022-23.
Having discovered his error, he wishes to correct the situation as fast as possible, especially as penalties appear to clock up on a weekly basis.
I don't think that he is registered for self assessment online. If he does need to set up an online account, then it looks like a 4 week delay is involved, with penalties accruing meanwhile.
I've read that self-employment might involve a new UTR, although it also said that such earnings can be declared on the normal SA100 form.

Is he liable for any penalties, and if so, what is his best way forward to minimise them?
I did read that submitting a paper version of form CWF1, sent by recorded delivery, might serve as notification of self-employment, which would at least stop any further penalties accruing.
Any guidance much appreciated!

[bd6759]

A person only needs to file a tax return if they have been given notice to do so. They will incur late filing penalties if they don’t file on time.

If a person has not been given notice to file a return they have an obligation to notify HMRC if they have a liability to tax that is not covered by tax deducted at source. If there is no liability there is no failure to notify.

[uncle john]

Many thanks - my friend will be relieved to hear this.

[williamjv]

My Advice:

Based on the information provided and the reply from bd6759, your friend may not be liable for significant penalties if he has no tax liability. However, to minimize any risk:

Notify HMRC: Have your friend notify HMRC about his self-employment as soon as possible. This can be done by submitting a paper version of form CWF1 by recorded delivery. This serves as notification and can help stop any potential penalties from accruing.

Set Up Self-Assessment: If not already done, your friend should set up a self-assessment account online. While this might take a few weeks, it will ensure he can submit returns in the future.

Submit Tax Return: If HMRC issues a notice to file a return, ensure your friend completes and submits it promptly. Given his low income, it's likely he won't owe any tax, but timely submission will prevent penalties.

Seek Professional Advice: For peace of mind, consulting with a tax professional or accountant might be beneficial. They can provide tailored advice and ensure compliance with HMRC requirements.

By taking these steps, your friend can rectify the situation and avoid any unnecessary penalties.