HM Revenue & Customs (HMRC) wants to change its rules on tax return penalties to ensure the system is fairer, meaning that hundreds of thousands of Britons who fail to complete the self-assessment form on time could escape a penalty.
More than 10.2mn tax forms were returned on time before the deadline of midnight on 31st January this year, but 890,000 people were late.
Those required to complete a self-assessment tax return, but submit it once the deadline has passed, are faced with an automatic £100 fine under the current system; however, the rules fail to make allowances for simple mistakes made by honest taxpayers who miss the deadline by a day or two.
HMRC has also acknowledged that anyone who submits their tax return just 24 hours after the deadline faces the same £100 penalty as someone who misses the deadline by almost three months.
Taxpayers are also fined for late returns even if they do not actually owe money, which is another issue that could be updated – before 2012, a penalty was cancelled if no tax was due.
HMRC only grants someone a penalty fee waiver in extreme circumstances such as the death of a spouse, an unexpected hospital stay or a fire.
Other reasons for late submission, including having problems with completing the form, are not accepted as sufficient grounds for a fee waiver, though this could soon be changed with the proposals for a more lenient approach.
Chas Roy-Chowdhury, from the Association of Chartered Certified Accountants, said: “We seem to have lost sight of the fact that the taxpayer is the unpaid administrator of tax compliance and we should be looking to smarter ways of dealing with late filers.”
The new proposed system would operate in a similar way to motoring penalty points, so that only repeat offenders – with numerous points accrued – would be punished.