I have a young client who submitted tax returns for 2014 and 2015 (when he was just 19) after a contractor he did a small amount of work for told him he had to register for self assessment. He submitted the returns in response to penalty notices but frankly he didn't know what he was doing. I think basically he panicked.
The result is that he appears to have reported far too much income on his tax returns and is being assessed for both tax on this incorrect income and penalties which he simply can't pay.
I'm sure I've read that HMRC do have powers in certain circumstance where the situation is unfair and inequitable to give special relief and set aside penalties and make adjustments.
We decided to try and help this young client. He managed to get his bank statements back to 2013 and HMRC provided details of employment income and CIS income back to 2013. They show he had very little income in 2014 or 2015 (less than 2,000 in each year - he was still living at home) but his tax year overviews (I assume based on his incorrect tax returns) show tax due of 1,573 and 1,894 respectively indicative of a much higher levels of income than he actually earned.
There is such a wild discrepancy here that I feel HMRC should have some discretion to correct things even though we are outside the 4 years allowed. I'm just wondering if anyone knows if HMRC do have any flexibility.
Ignoring the failings of our young client it seems just wrong that HMRC can be insisting on over £3,000 of tax for 2 years where he earned under £4,000 in total.