HMRC cancelled 270,000 fines for late submission in 2016 alone.
How do we know the figures?
Dan Niedle is the UK tax and finance expert who submitted a freedom of information request concerning the cancellation of issued HMRC penalties. He is a partner at Clifford Chance and was spurred into action by an erroneous penalty he received from HMRC. Despite filing his self assessment tax return in December, he was issued a late filing notice in January.
The results of his FOI are actually quite shocking:
- Cancelled fines in 2014: 400,000
- Cancelled fines in 2015: 610,000
- Cancelled fines in 2016: 270,000
- HMRC do not track the number of wrongly given fines.
All of these penalties were withdrawn by HMRC because the taxpayer had a “reasonable excuse”.
By not recording and monitoring their mistakes, HMRC are unable to fully analyse their underlying reasons.
As Dan Niedle explains, “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?”
While his own personal fine was cancelled, the self assessment system continues without robust checks and balances in place.
Self assessment penalty appeals
If you have received a late penalty you can appeal against it. HMRC are reasonable if you have a valid reason for your tax return not being submitted on time. The appeals process can only begin after your tax return is filed and can only be done in writing.
Not limited to self assessment tax returns
Mike Brooks, member of AccountingWeb, was sent a late penalty notice on his SA900. He had submitted this on time, with an HMRC email receipt to prove it. The process to rectify the situation doesn’t seem to contain an option whereby HMRC accept responsibility for their mistake. Mr 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.”
No organisation is right 100% of the time and HMRC’s appeals system should include an option which states that they are in error.
HMRC’s opinion
HMRC’s opinion on late penalties was made clear by a spokesperson:
“We don’t want penalties, we just want tax returns. 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.”
What do you think?
Perhaps it is time for them to rethink the automation of their late penalties, as the time and cost of rectifying such high numbers of mistakes must preclude their perceived benefit. It is certainly important that HMRC collect statistics about their systems on an ongoing basis. Necessary improvements should not be uncovered by FOI requests, but part of regular monitoring of efficiency.
