Resolving self employment penalties with HMRC

How can you resolve unfair penalties when no longer self employed?

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My partner recently signed into his HMRC account after several years to find dozens of messages with penalties for self employment.

These seem to start in 2022 and he hadn't been self employed since 2019. He completed the form multiple times to say he's no longer self employed at the time and even spoke to them on the phone about it as he received no notification.

As he's not been self employed, I don't understand why he's had all these penalties. He works full time and pays tax through his job.

This is causing him a great deal of stress and anxiety, he spent two hours trying to get through on the phone with no luck.

What do we need to do to get these penalties resolved? It currently says he owes around £1700.

Replies (30)

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the sea otter
By memyself-eye
03rd May 2024 18:46

If he wasn't self employed since 2019, did he notify HMRC that that was the case AT THE TIME?.
I'm guessing not.
He will have been notified that 'tax returns' were due in 2019, 2020, 2021, 2022 etc, etc
I'm guessing (again) that they were ignored.
It's up to the individual (ie: all of us) to keep HMRC advised of their circumstances. autrefois they will be penalised.
Why did he wait 5 years to check?
My advice?
Pay up, it goes towards my pension.

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Replying to memyself-eye:
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By Ladyluci
03rd May 2024 18:52

Hiya

No he didn't wait five years- he reported in 2019 just after he left self employment. He then filled out the form again a month later after no response. The month after that he phoned them and explained that he hadn't heard anything, the person on the phone said it was sorted.

He should have checked in the last few years, yes, but as far as I'm aware everything was done up front to let HMRC know both through their form and over the phone.

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By Paul Crowley
03rd May 2024 18:52

He signed up for no paper?
Ignored the emails saying check your GG?
At least one tax return , probably more were issued, as in a notice to file, a reminder, the first penalty etc.
Loads of notifications were ignored.
It might be a bit late to appeal, but you can try.

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Replying to Paul Crowley:
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By Ladyluci
03rd May 2024 18:55

Hiya

Apologies if I am completely wrong, but if HMRC are notified you're no longer self employed and that's confirmed on the phone is it still the case that you need to do tax returns? What's confusing me is why it seems to be from 2022 onwards, three years after he told them he wasn't self employed.

Thanks very much for your help.

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Replying to Ladyluci:
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By FactChecker
03rd May 2024 19:25

"if HMRC are notified you're no longer self employed and that's confirmed on the phone is it still the case that you need to do tax returns?"

You're 'connecting' the wrong ideas there.
Forget the idea that this has anything to do with Self-Employment ... the most likely scenario is that HMRC have been sending him a NTF (Notice To File a tax return) for one or more years - and those have been ignored (which leads to cumulative penalties).

IF (because we're having to guess here) that is the case, then:
a) HMRC can issue a NTF to any taxpayer at any time (they will usually have a reason but don't have to disclose that) ... this is something for which they have statutory powers;
b) if a taxpayer receives a NTF they can either do what is requested (complete/file a SA return for the relevant year) OR request that the notice is cancelled (because for instance there will be no tax due) ... but both actions have deadlines which will be missed if ignored;
c) once the deadlines are missed, penalties are automatically issued ... and these will continue to be issued incrementally either until paid, or appealed with a Reasonable Excuse - but again within a deadline.

So, however unfair it seems (and irrespective of self-employment or not), you can be penalised for ignoring communications from HMRC - even if you owe no tax.

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Replying to FactChecker:
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By Ladyluci
03rd May 2024 19:33

Thank you for clarifying- I wasn't aware that was the case and it makes me very glad I check my own account frequently, as I had no idea

I'll see if there's any way we can do the appeals process, but if not do you know if there's an option to pay in installments? My partner works in care, there's no way he'd have the funds to pay such a large amount of money up front.

Thanks for your help and clarification, it's really appreciated.

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Replying to FactChecker:
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By Ladyluci
03rd May 2024 19:38

Sorry for the second message - I've just double checked and they don't say notice to file, they specifically say 'Self Assessment Notice to complete a tax return', does that make a difference?

Thanks!

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Replying to Ladyluci:
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By Paul Crowley
03rd May 2024 19:39

No
The point being made is that you do not get a paper tax return sent unless you ask for one.
How many years were the returns issued for.
You may well find that the first year after ceasing was recorded as filed soon after the telephone call. HMRC treated the tax return as filed. The phone person did the job that was requested.
BUT that would not necessarily mean that the taxpayer was taken out of the need to file. If taken out then a letter gets sent to both the taxpayer and his agent.

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Replying to Paul Crowley:
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By Ladyluci
03rd May 2024 19:46

2022- 2024, nothing before that as far as I can see! Which is the reason for my confusion, as we notified them three times (twice via form once via phone) that he wasn't self employed as from 2019 onwards - we told them in 2019 as soon as he got a full time job.

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Replying to Ladyluci:
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By Paul Crowley
03rd May 2024 20:01

'2022- 2024'
Does that mean year end 2022,2023 and year end 2024 (three tax returns
Penalties would be
ye 2022 100+900+300+300 £1600
ye 2023 100, next penalties start £10 per day from beginning of May, daily penalty of £10 keeps going until £900
File the 2023 return urgently or spent the time on the phone it takes to get the returns retracted.

Lots of notifications were ignored, this is his fault. He needs to suck it up and sort it with HMRC, not blame HMRC for his mistakes. Make sure that GG is set for paper, NOT paper free and the email and residential addresses are correct

HMRC can issue a tax return whenever they want to. Chances are they know or suspect something that was taxable in ye 5 April 2022. It could be something really small, but something triggered the issue of the return for ye 2022.
What date was it issued? The usual date shown is 6th April. A later date implies something turned up triggered the issue.
HMRC do not issue tax returns randomly.

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Replying to Paul Crowley:
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By Ladyluci
03rd May 2024 20:13

6th April 2022 is the date on it, then there's one for 6th April 2023 as well, with the last penalty notice on the 13th Feb this year as the last message received, so that seems to suggest it's just the normal dates maybe?

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Replying to Ladyluci:
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By Paul Crowley
03rd May 2024 19:35

Nothing you assume is correct.
If HMRC issue a notice to file then taxpayer needs file.
A lot of penalties were not issued during Covid times.

Back in 2019 it was almost always the case that a tax return was issued for at least one year after the cessation of trading.
If he had an accountant then the accountant should have been on top of this.
But chances are that if he ignored HMRC, then he ignored his accountant as well.

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Replying to Paul Crowley:
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By Ladyluci
03rd May 2024 19:42

Hiya Paul

Sorry, not sure how replies work and if you see the one to my reply above- the messages all say Self Assessment Notice to complete a tax return not notice to file, is this different or is it the same with different wording?

Thanks for your time

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Replying to Ladyluci:
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By FactChecker
03rd May 2024 19:55

Sorry ... but they're the same thing.
I was using the generic acronym that is often used, but the powers simply refer to a Notice issued by HMRC - which is most commonly a notice to complete and file a return (in this case, as guessed earlier, a Self Assessment return).

BTW without being patronising, I presume that you're aware that SA and S-E (self-employment) are completely separate concepts - and that a SA return might include self-employed and employment and savings interest and so on.

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Replying to FactChecker:
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By Ladyluci
03rd May 2024 20:01

Not patronising at all, thanks for the information. I appreciate you taking the time to let me know!

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By Matrix
03rd May 2024 20:01

I have no idea why everyone is being so harsh. Why would someone who is wholly PAYE check their tax account 5 years after they ceased self-employment?

Ladyluci - ask him if he has received anything on paper and also what prompted him to check his online account. Then go on the HMRC webchat and ask why they asked for a tax return in 2022. It may not be anything to do with the self-employment, it could be insufficient tax collected through PAYE. If he doesn’t have any untaxed income to declare, no additional tax etc., then ask for the returns to be cancelled. Don’t file the tax returns (without seeking professional advice). Save a copy of the webchat.

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Replying to Matrix:
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By Ladyluci
03rd May 2024 20:04

Thanks for the response! What prompted him to check his online account was a (clearly imo) spam email saying he was getting a tax return, so kudos for checking his account instead of clicking a dodgy email I guess, haha. But nothing legitimate from HMRC was what prompted the check.

I'll get him to try the web chat, thank you for the advice!

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By Londonacc
03rd May 2024 20:39

Don't listen to others on here, appeal the penalties, I'm 99% sure they will be removed. For HMRC's criticisms they can actually be reasonable most of the time.

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Replying to Londonacc:
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By Ladyluci
03rd May 2024 20:40

Thank you! We will definitely appeal.

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Replying to Ladyluci:
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By Dougscott
04th May 2024 07:52

It might be worth checking the tax position for the years in question which seem to be 2021/22 and 2022/23. Add up all income for those years and tax paid (he should have received P60s or P45s from all employers) and check see if he has paid the right amount of tax. Assume if low paid there will be no savings income, rent income or other income to take into account? It could be if he has had several jobs that there could be a tax refund due.

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Replying to Dougscott:
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By Paul Crowley
04th May 2024 21:57

I have a nice old lady that gets tax returns each year.
My partner does them for free. Last two years ended up with a total of £70 in refunds. Did not look at earlier years.
Her income is state pension with three other pensions. It should be capable for HMRC to code correctly, but they fail every year.

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Replying to Ladyluci:
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By WongR
05th May 2024 01:47

I also recall that some of the penalties due for late filing are linked to the actual tax liability for that tax year. If all that the income he has is taxed at source there should be no tax due barring the odd quid due to rounding differences in the PAYE calculations.

To try and reduce this to nothing, have a think about any work related expenses that may not have been reimbursed and claim a deduction for it (you don't to find much - perhaps eg maybe a work related journey that had not been reimbursed?)

Once you bring his tax affairs up to date and if the tax liabilities is at zero / or a tax refund is due, it is easier to appeal the penalties with the line of arguments you have mentioned previously.

I wish you luck

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Replying to WongR:
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By FactChecker
05th May 2024 13:49

"If all that the income he has is taxed at source there should be no tax due barring the odd quid due to rounding differences in the PAYE calculations"
... is not entirely true, but more importantly OP actually said:
"he's not been self employed ... He works full time and pays tax through his job"
- so no mention of 'all income being taxed at source'.

OP's confusion was due to thinking there was no need for an SA return if not self-employed ... and it's just as inaccurate to say that being paid under PAYE means no need for an SA return (or indeed that there 'should be no tax due').

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Replying to FactChecker:
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By WongR
05th May 2024 15:02

I don't recall mention of any other income for the OP apart from employment income (which is income tax at source) throughout the thread... If you know something we don't - I'd be glad to hear it.

Aside from that conclusion jumping - all this talk of penalty appeal is useless if there is actually untaxed income. So let's hear it from the OP first...

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Replying to WongR:
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By Ladyluci
05th May 2024 15:21

Heya,

Thanks for all the replies - he has one full time job and pays income tax through PAYE, nothing else on the side or anything at all. Once self employment ended in 2019 he's only had this job.

Thanks!

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Replying to WongR:
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By FactChecker
05th May 2024 15:50

"conclusion jumping" is where YOU take absence of evidence as evidence of absence ... in other words, irrespective of this particular thread, you shouldn't take the fact that an OP hasn't mentioned something to mean that something isn't in play.
This site is littered with examples of where an OP (particularly if an unrepresented taxpayer) has omitted something that they weren't aware was relevant ... and then received poor advice on that basis.
Don't forget that comments posted here aren't a private dialogue between you and a client, they remain available for hundreds if not thousands of other readers - so need to be accurate not assumptive.

EDIT - and OP's response doesn't yet clarify matters:
"he has one full time job and pays income tax through PAYE, nothing else on the side or anything at all. Once self employment ended in 2019 he's only had this job."
He may well have no other taxable income - but saying he only 'has this one job' doesn't mean that there is no tax due (at the simplest, income tax isn't only due on earnings as an employee or from self-employment - as I'm sure you must know).

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Replying to FactChecker:
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By Paul Crowley
05th May 2024 17:11

+1
Something triggered the issue of a return. HMRC did not 'forget' to issue ye 2020 and ye 2021
The problem is that the person who is the taxpayer is not the OP.

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By I'msorryIhaven'taclue
05th May 2024 16:20

Throw into your conversation / botchat with HMRC something along the lines of: "Oh dear, I do hope we can resolve this matter without my partner having to issue a subject access request".

Go read up on "subject access request" to see what a nuisance they can be to HMRC. All of their data on your partner, including background notes, would have to be forwarded to your partner. Someone at HMRC has to spend time redacting (blotting out) all the things they don't want you to read; after which you will be requesting that they justify each and every redact. If they happen to get anything wrong procedurally, or have written anything incriminating in their logs, they know they're in for the high jump. A SAR is your trump card!

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By K81
07th May 2024 13:09

is there another reason that HMRC may have re-opened the self-assessment records, for instance household receiving child benefit ?
Being self-employed is not the only reason to complete self-assessment tax returns.

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By SteveHa
07th May 2024 15:48

If there is genuinely no reason for him to complete, or for HMRC to require a Tax Return, he could try asking for S8B withdrawal.

The normal time limit is 2 years, but HMRC have discretion to extend that in exceptional circumstances.

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