HMRC Issues Self-Assessment PenaltiesSunday, February 26th, 2012
From last week, HMRC began a two-week process of issuing penalty notices for over 800,000 taxpayers who failed to meet the 31 January 2012 deadline for online filing 2010/11 tax returns and the payment of any outstanding tax ( In fact, this deadline was extended this year to 02 February 2012 in light of industrial action at HMRC).
This year sees HMRC’s new penalty regime as follows:
- £100 immediate fine from 01 February (03 February this year as a result of strike action)
- £10 a day fine from 01 May for 90 days, to a maximum of £900
- £300 fine on 01 August, or 5% of the tax due if this is greater
- £300 fine on 01 February, or 5% of the tax is that is greater
Paper returns were due 31 October; therefore, the above penalties are brought forward three months for those choosing not to file online. HMRC have advised anyone who has still to file to do so at once to avoid further penalties. Those choosing to file by paper will already be into the £10 per day area of the penalty regime.
Taxpayers are able to appeal by 31 March 2012 against penalties if they have a ‘reasonable excuse’, a term that has no legal definition, but according to HMRC’s Website, may include:
- The death of a close relative or domestic partner
- Payment is lost or delayed due to something unforeseen
- Serious illness of the person or a close relative
- Failure of HMRC’s computer system
- Failure of a personal computer system
Perhaps a better definition was given in the case of Buxton Rugby Union Football Club v Revenue & Customs in June 2011. In his decision, the judge, a member of the First Tier Tax Tribunal quoted from a previous ruling:
‘HMRC are right to say that ‘reasonable excuse’ is not defined in the legislation. However, this Tribunal has held that ‘an excuse is likely to be reasonable where the taxpayer acts in the same way someone who seriously intends to honour their tax liabilities and obligations would act.’
In addition to the ‘reasonable excuse’, taxpayers who do not believe that the need to be in the Self-Assessment system can telephone HMRC’s helpline on 0845 9000 444. If HMRC agree, the penalty will be cancelled and the employee removed from SA.
HMRC’s Stephen Banyard is again quoted as saying ‘we want the returns, not the penalties. So, anyone who still hasn’t sent theirs should do so as soon as possible’
In fact, this quote was the first thing that struck me when I read the press statement. HMRC seem to be much swifter sending out penalty notices this year. Hopefully, this situation will be replicated at the time that P35 late filing penalties are due (mid-April this year), thereby avoiding the severe criticism aimed at them in previous years for issuing late penalty notices.
HMRC advise that the number of taxpayers who have missed the 31 January deadline has risen in recent years. In 2004/05 it was 876,000, rising to over 1 million in 2009/10, peaking at 1.4 million in 2009/10. The 800,000+ figure for 2010/11 is a significant drop, indicating there has been some success at curbing late filing. However, it is still a massive number of defaulters and, though the penalty regime will be welcome for Treasury pockets, obviously further communication is necessary to ensure greater compliance in the future. The penalty regime appears to have had an effect, however, not significant enough – what is the reason for late filing and payment?
- HMRC – Penalties Statement
- HMRC – ‘Reasonable Excuse’ for late payment
- HMRC – ‘Reasonable Excuse’ for late filing
- Payroll Help 30 July 2011 – ‘Another Tax Tribunal Objects to HMRC’s Interpretation of ‘reasonable excuse’