HMRC issues proposal for scrapping £100 fine for late tax returns

/ Posted By - Bradleys Accountants / Categories - Accounting for Individuals

HMRC has opened a consultation that looks at scrapping the controversial £100 fine for late tax returns. At present, taxpayers have to pay a one-off £100 fee if they miss the deadline by a day – the same fine as someone who misses the deadline by 3 months. The fines increase to £10 per day after three months, and £300 or 5% of tax after six and twelve months, whichever is greater but all are treated equally for the first ‘offence’.

As part of its plan to make the UK tax system as user-friendly and efficient as possible, HMRC has opened discussions to replace the one-off fine with non-financial penalties or a higher level of interest on accrued debts.

HMRC believes that the current system ‘makes no distinction between a customer who misses a deadline by a day or two and someone who has made no attempt to comply at all’.

They said, “We currently impose a large number of low-value penalties in Income Tax Self-Assessment and expect to do the same in the Real Time Information PAYE regime. We want to consider whether we could better differentiate between deliberate and persistent non-compliers and those who might make an occasional error.”

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    They said, “We currently impose a large number of low-value penalties in Income Tax Self-Assessment and expect to do the same in the Real Time Information PAYE regime. We want to consider whether we could better differentiate between deliberate and persistent non-compliers and those who might make an occasional error.”

    As an alternative approach, the paper proposed a system similar to penalty points for driving offences such that initial penalties can be avoided, but repeat offenders are handed substantial fines for persistent non-compliance. It also proposed updating the current definition of what constitutes a ‘reasonable excuse’ for missing the deadline, to make it more wide-ranging.

    Recent figures reveal that close to 890,000 people faced an automatic £100 penalty for missing the 2013-14 tax return deadline.

    ACCA’s Chas Roy-Chowdhury, said that the existing approach is an unjust source of income for the government and they should be looking at smarter ways of dealing with the fines.

    The consultation is open for discussion until 11 May 2015.

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