Nearly one million people wrongly chased by HMRC for late tax

It has been revealed that tax inspectors have been trying to fine up to one million innocent people hundreds of pounds each for late tax returns.

HM Revenue Customs (HMRC) have admitted that 963,000 taxpayers were found to be unnecessarily registered for self-assessment (SA) in the past two years – that’s one in 11 of the UK’s 11 million people who are registered for SA every year.

Despite none of the taxpayers putting in SA tax returns for the last three years, they were still being notified of late filing penalties by HMRC’s inspectors of an average of £300 each. They have now been taken out of the system altogether.

A source at HMRC said: “We checked hundreds of thousands of SA records, this allowed us to take large numbers out of SA completely. These are taxpayers, who should never have been in SA in the first place so not a penny of tax has actually been lost.”

None of the taxpayers who had been wrongly fined had made any payments and an HMRC spokesman said: “We only want tax returns from people who genuinely need to complete them.

“We’ve removed 200,000 people from self-assessment who are now paid through PAYE but might have forgotten to inform us. We want to reassure these people that they won’t have to pay any penalties, which is why we’ve cancelled them.

“Our longer-term goal - through Personal Tax Accounts, currently used by 11 million taxpayers - is to take away the need for an annual tax return, making tax simpler and fairer for everyone.”

Chairman of the House of Commons Treasury, Nicky Morgan MP has been sympathetic to the plight of the people affected and said her select committee would consider investigating, commenting: "I know as a constituency MP just how stressful people find it being penalised by HMRC for something they don't owe.

"I appreciate HMRC have to deal with millions of taxpayers but they need to focus on those who really are trying to evade the tax system not those who shouldn't be filling in forms at all."

Tax accountants UK wide have said the system of penalising taxpayers who do not submit SA returns on time needs to be reformed. Currently taxpayers who are registered for SA are charged an automatic penalty of £100 if a tax return is up to three months late.

Jo Nockels, Senior Manager at TaxAssist Accountants remarked: “HMRC’s systems and access to information about taxpayers is improving but their data is far from perfect and their departments are not always very joined-up. We cannot rely on HMRC to always be up-to-date with a taxpayer’s circumstances.”

Jo’s advice for any concerned taxpayers, “If you are receiving fines from HMRC for late tax returns but you believe you don’t need to file a return, we would recommend doing something about the fines rather than ignoring them.

You could call HMRC on the self-assessment general enquiries line and explain why you believe you don’t need to file a tax return. For example, if you’re now in full time employment and all your tax is paid via PAYE. If HMRC agree, they should cancel the tax return and any fines that have been imposed.”

Are you thinking about becoming self-employed or starting up your own business? Unsure of where to start with how you’ll pay tax? TaxAssist Accountants are here to help. Call us today on 0800 0523 555 or use our online contact form to get in touch. 

Date published 31 Aug 2017 | Last updated 31 Aug 2017