Taxman attacked for letting penalties stack up

Businesses who fail to submit their P35 forms on time should dispute the level of penalty they receive if HM Revenue & Customs proves slow in dispatching the late filing notice.

Issuing the advice, an advisor said a recent tax tribunal case found that HMRC unreasonably delayed the issuance of penalty notices until the taxpayer's charges ran into the hundreds of pounds.

Had HMRC issued the penalty notice in the first month - rather than delaying it until the fourth month, the penalty would have been only £100, not £400 as HMRC demanded, said UHY Hacker Young.

But rather than being an isolated case, the firm says it is "seeing a steady stream" of taxpayers who have fallen victim to HMRC's stalling tactics, in terms of penalty issuances for late end-of-year tax returns.

"Waiting four months whilst the meter is running as a matter of policy to tell someone that their return is late is grossly unfair," the firm said.

"Many employers fail to submit their return through genuine mistake or oversight, and are not trying to evade their obligations. These higher penalties are disproportionate when an earlier reminder is often enough to tell them of their error."

Penalty notices for late submission of end-of-year returns (form P35) are due to be issued over the next couple of months, affording enough time for tax officials to reflect the judgement in Hok Ltd Vs HMRC.

Rob Durrant-Walker, tax partner at UHY Hacker Young reflected: "HMRC is supposed to be in the business of getting everyone to pay the right amount of tax at the right time, and helping taxpayers to meet their obligations – not creating additional charges. We hope that HMRC now take this decision into account and amend their procedures."