News of HMRC cancelling 270,000 late penalty notices in 2016 has been uncovered after a freedom of information request spurred on by a wrongly issued late tax return penalty.
Clifford Chance partner Dan Neidle, who specialises in UK finance and corporate tax, filed the freedom of information (FOI) request after he received a late filing notice at the end of January, despite submitting his self assessment tax return at the end of December.
The FOI revealed that due to taxpayers having a reasonable excuse HMRC withdrew 270,000 penalties in 2016, 610,000 in 2015 and 400,000 in 2014.
Speaking to AccountingWEB about the issue, Neidle criticised HMRC for not tracking the late penalty mistakes, and after the extent of incorrect late notices was revealed questioned whether there is an endemic problem with HMRC's systems.
“I was surprised at the number of successful appeals, given that quite a lot of people would just receive it, pay it and not make a fuss,” he said. “To have 400,000 successfully appeal two years ago seems a big number. You just wonder what is going on.”
Neidle told AccountingWEB that questions must now be asked about HMRC’s systems and why such late file notices are being incorrectly issued. “I think there must be a question as to whether there is an issue in the systems, whether it’s right to put out quite so many penalties on an automated basis and whether it is right that HMRC doesn't monitor whether in fact mistakes are made. How can HMRC possibly assess whether their systems are working if it doesn't monitor how many problems arise?”
The tax specialist pursued the freedom of information request as he hadn’t seen statistics on penalties issued in a while. However, HMRC didn’t actually have the figures Neidle requested, which was how many penalties were issued mistakenly, as it is not something the tax authority tracks.
“I was a bit disappointed that HMRC doesn't think it is important to monitor how many mistakes are made,” he said.
When the penalty was overturned by HMRC last month Neidle received an automated letter stating "if you file on time we won't charge penalties".
In a similar case from March, AccountingWEB member MikeBrooks reported that he received a wrongly issued late filing penalty on the SA900 he submitted on 7 April 2017, and has HMRC’s email receipt as proof.
Deliberating his next steps on Any Answers Brooks said: “We’re reluctant to fill in SA370 Appeal form – it asks for “Other acceptable excuse” which implies we’re in the wrong and will doubtless put a black mark on our record.”
'We don't want penalties'
An HMRC spokesperson confirmed to AccountingWEB that hundreds of thousands of penalties are cancelled every year when taxpayers provide a reasonable excuse.
“We don’t want penalties, we just want tax returns,” said an HMRC spokesperson. "Taxpayers with a reasonable excuse for filing late or who have been taken out of SA do not have to pay penalties. Taxpayers who file on time are not issued with penalties.”
About Richard Hattersley
Richard is AccountingWEB's practice correspondent. If you have any comments or suggestions for us get in touch.