Has anyone had any success in appealing against a self assessment late payment penalty?
My client has just received a penalty for £400 which represents 5% of the tax that was outstanding for 2010/2011 as at 1 March 2012. The client was late in filing his tax return (filed 4th April 2012) and started making arrangements to try and settle his outstanding tax bill of £8k. He paid 25% of the tax straight away and tried to organise with HMRC a payment plan to settle the rest. HMRC have been very unhelpful regarding this which has led to my client to take out a bank loan at a much higher rate to settle the debt with HMRC asap.
The client understood that he would have a late filing penalty of £100 plus interest, but feels that the additional £400 is unfair and equates to an interest rate of approx 20%!!
My client was self employed for a year (2010/2011) and taxable income was £35k. He was the sole earner in his house at the time as his wife had maternity leave with their second child. My client had suffered £8k of bad debts with one of his customers and as a result returned to employment for most of 2011/2012. I know it is no excuse but as he was only self employed for just one year and suffered a substantial bad debt the money was not there to be paid. I feel that HMRC will not see this as a reason to not impose the penalty but I feel I should try for my client.
Has anyone got any advice on how to appeal against this?