HMRC Shoots Itself in the Foot (Yet Again)
What is the point in having a penalty for filing tax returns late if you then withdraw it?
One begins to suspect that our beloved taxing authority is a metaphorical centipede, since it shoots itself in the feet so often. Then again, it is possible that much of the time the Department’s political masters are actually doing the shooting?
The latest debacle threatens the Department’s credibility once more. As previously identified in this column, taxpayers have between 6 April and 31 January i.e. the best part of ten months in which to complete their tax returns.
This should be possible for anybody to achieve and it is hard to credit any reasonable excuse for failing, other than a severe medical condition such as a coma that stretches for several months.
Clearly, if you leave filing your tax return until the last week in January then things can go wrong. However, if this happens surely you deserve to pay a token penalty of £100 for the pleasure of your failed brinksmanship.
Tens of millions of taxpayers do manage to hit the deadline so is there any reason why the slapdash, lazy and inefficient should get away with ignoring it.
Looked at differently, why should any of us bother to file a tax return at all? After all, is missing the deadline by a couple of months that much different from missing it forever?
Going a step further, HMRC has also completely redefined the concept of reasonable excuse.
For years, they have rejected perfectly reasonable excuses reluctantly is excepting only the most extreme circumstances, such as fire, flood and death.
There has now been what looks like a complete about turn and this list has been drawn directly from HMRC’s website.
A reasonable excuse is normally something unexpected or outside your control that stopped you meeting a tax obligation, eg:
- your partner died shortly before the tax return or payment deadline
- you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- your computer or software failed just before or while you were preparing your online return
- service issues with HM Revenue and Customs (HMRC) online services
- a fire prevented you from completing your tax return
- postal delays that you couldn’t have predicted
It will be fascinating to see whether from now on HMRC accepts this precedent in other circumstances.
Going a step further to be helpful, HMRC is apparently not even going to track whether an excuse is valid or invented. Arguably, given recent failures, Bullet 4 would give all of us carte blanche to ignore our responsibilities for ever more.
The problem with waiving penalties is that this creates what is known in law as "legitimate expectation". If you have failed to file your notification of EMI share options within the 92 day deadline, surely you should not expect to suffer having done exactly the same as those who can't be bothered to file a tax return with considerably greater leeway?
When it comes round to 31 January 2016, if you ignore the theoretical time limit and file late, will HMRC have the audacity to charge a penalty having waived practically all of them in 2015? Time will tell.
This is a really sorry state of affairs and those of us who did the decent by filing on time should urge Margaret Hodge and the Public Accounts Committee to come down hard on our taxing authority for yet another failure which will cost the country dear.
Not only is there a loss of penalties that should have been paid by close to 900,000 defaulters but the nefarious might perceive tax evasion and abusive avoidance opportunities while our taxing authority still seems to be struggling to cope.