HMRC U-Turn On Late Filing Penalties

 In Appeal, penalty

A few weeks ago The Telegraph got hold of a leaked memo from HMRC saying that it lacked sufficient resources to check in detail every reasonable excuse offered for a late tax return. Because of this a new policy was adopted where HMRC would accept reasonable excuses at face value – if they met certain conditions.

This is a face loser for HMRC, an organisation that likes to bare its teeth in public at any opportunity. Here AccountingWEB follow up on the story.

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HMRC has relaxed its conditions for accepting appeals against late filing penalties for self-assessment tax returns.

This change in practice was first highlighted by The Telegraph who obtained a leaked memo from HMRC. The HMRC position was finally confirmed on 5 June 2015 after huge amount of press coverage on the issue.

The fact is HMRC doesn’t have the sufficient resources to check in detail every reasonable excuse offered for a late tax return, so from now on it will accept those excuses on face value if all of the following conditions are met:

  • The penalty relates to the late filing of a 2013/14 SA tax return, not to returns for earlier tax years and not for returns relating to any other taxes
  • The 2013/14  SA return must now have been received by HMRC
  • The tax due for 2013/14 must have been paid

This means that taxpayers who submitted their appeals on time, and included a reasonable excuse for lateness, should get their late filing penalty cancelled. Is that fair?

It may be fair in respect of the 2013/14 tax returns, but it is not consistent or fair in respect of late filing penalties for earlier tax returns.

Philip Fisher points out that HMRC have widened the scope of what they will accept as a ‘reasonable excuse’ from only the most extreme of circumstances such as death, fire or flood to this list that includes:

  • Computer failure
  • Service issues with HMRC online services
  • Postal delays

Cases challenging late filing penalties for earlier years are still working their way through the courts. The recent case of Brian Higgins is a typical example of a taxpayer who had ‘service issues with HMRC online services’ as the required authorisation code for his tax agent didn’t arrive from HMRC in time. However, the Tribunal upheld Brain’s late filing penalty.

Read more here.

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