HMRC could scrap £100 fine for late self-assessment returns

10th February 2015

HM Revenue and Customs (HMRC) could be set to ditch the initial £100 penalty for late self-assessment tax returns under radical new Government plans.

The tax authority admitted the current system was punishing honest taxpayers who miss the deadline by a day as a ‘simple mistake’ or an ‘uncharacteristic failure’.

At present, those who file their tax return 24 hours late are billed £100 – the same fine as someone who misses the deadline by almost 12 weeks.

HMRC is therefore considering replacing the automatic fine, which has been in effect for the last 20 years, with penalty points in the style of motoring penalties designed to punish repeat offenders rather than those who make a one-off error of judgement.

HMRC believes 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’.

The proposals could mean thousands of taxpayers who fail to file their self-assessment forms on time each year could escape a financial penalty.

HMRC added: ‘We want to consider whether we could better differentiate between deliberate and persistent non-compliers and those who might make an occasional error.

‘One option could be a progressive system similar to penalty points for motoring offences so that initial financial penalties are avoided, but more substantial penalties then apply for more serious failures or for persistent non-compliance’.

HMRC has confirmed it will also review the current list of reasonable excuses for late tax returns with the potential for extending its raft of justifications in due course.

Prior to the 31st January deadline for online self-assessment tax returns for 2013-14, 10.2 million returns were filed on time, but 890,000 were overdue.

Chas Roy-Chowdhury, of the Association of Chartered Certified Accountants, said the existing penalties were an unjust source of income for the Government.

“We seem to have lost sight of the fact that the taxpayer is the unpaid administrator of tax compliance and we should be looking to smarter ways of dealing with late filers,” said Roy-Chowdhury.

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