HMRC Scraps Million Self-assessment Penalty Fines

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Last year, HM Revenue and Customs canceled thousands of self-assessment fines, sparking calls for a quick “root and branch” system's review.

The accountancy institute, vice-president of ICAEW, Paul Aplin, noted that late filing fines were “unfair, always disproportionate and the likelihood of counterproductive.” He stated: “Even with a nil liability — indeed if HM Revenue and Customs owe you tax — being late for a year incurs £1,600 in a penalty.”

But he welcomed the decision of HMRC to scrap the fines in situations where people shouldn't be involved in self-assessment as the “fair and pragmatic solution.”

The latest account of HMRC said it had written off 23 million pounds, relating to almost 25,000 cases in which people had not filed any self-assessment returns for three years.

It stated the move accompanied an analysis of whether taxpayers should be in self-assessment. If they already registered for self-assessment mistakenly, or if their tax was collected via pay-as-you-earn, then they were altogether taken from the self-assessment regime.

Also, HMRC waives fines in some cases where there's a “reasonable excuse.” Now, after 840,000 taxpayers, 7% of the total have missed the deadline for this January’s online filing, it urged people with a reasonable excuse to appeal.

The tax authority noted: “penalty rules of HMRC are designed to produce a level playing ground for the majority who try to get things done right while penalising those minorities who make careless mistakes or try to get around the rules. We apply the rules proportionately and fairly across the board.

However, disputes over notices of penalty often end up in tax tribunal, and HMRC usually wins these cases. Now, in a recent instance, the appellant — a managing director of a dormant firm — lost his battle of escaping penalties and interest of over £3,300, although he had no capital or income gains for the number of years in question.

With that, the penalty was then overturned in another case which involves an argument over whether the tax return was issued. The tribunal declared that HMRC did not show its processes of recording receipt of some return were “sufficiently complex.”

In another case, the tribunal questioned if a computer or pc could lawfully initiate a late payment fine. Even though the judge said the phrase in a rule that “HMRC is to figure out the amount” needed a decision by “a human” as to the stage of the fine. The notice of the penalty had been invalidated due to another reason, but: the taxpayer was imprisoned, and HMRC couldn't prove he had received any notice of filing a tax return.

The deadline to file paper tax returns which covering the tax year of 2016-17 is the end of October. If anyone misses the deadline will risk penalties of late filing unless they file the return by the end of January.

 

   

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