HMRC has relaxed its conditions for accepting appeals against late filing penalties for self-assessment tax returns.
This change in practice was first highlighted by The Telegraph who obtained a leaked memo from HMRC. The HMRC position was finally confirmed on 5 June 2015 after huge amount of press coverage on the issue.
The fact is HMRC doesn’t have the sufficient resources to check in detail every reasonable excuse offered for a late tax return, so from now on it will accept those excuses on face value if all of the following conditions are met:
- The penalty relates to the late filing of a 2013/14 SA tax return, not to returns for earlier tax years and not for returns relating to any other taxes
- The 2013/14 SA return must now have been received by HMRC
- The tax due for 2013/14 must have been paid
This means that taxpayers who submitted their appeals on time, and included a reasonable excuse for lateness, should get their late filing penalty cancelled. Is that fair?
It may be fair in respect of the 2013/14 tax returns, but it is not consistent or fair in respect of late filing penalties for earlier tax returns.
Philip Fisher points out that HMRC have widened the scope of what they will accept as a ‘reasonable excuse’ from only the most extreme of circumstances such as death, fire or flood to this list that includes:
- Computer failure
- Service issues with HMRC online services
- Postal delays
Cases challenging late filing penalties for earlier years are still working their way through the courts. The recent case of Brian Higgins is a typical example of a taxpayer who had ‘service issues with HMRC online services’ as the required authorisation code for his tax agent didn’t arrive from HMRC in time. However, the Tribunal upheld Brain’s late filing penalty.
As HMRC now accept that a problem with its online service as a reasonable excuse for late filing (without further investigation), would it not be equitable to cancel any outstanding late filing penalties where that excuse has been given in the past?
HMRC say they won’t accept any further appeals against penalties for late filing of 2013/14 SA returns, as the 30 day period has now closed. However, the First-tier Tax Tribunal may accept a late appeal, although that would mean the taxpayer has to incur the cost and worry of taking his case to the Tribunal.
The change in HMRC practice over SA late filing penalties will be extended to RTI late filing penalties, with further details to be announced by HMRC later this week. Watch this space!
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.