Revenue might remove £100 automatic penalty

The taxman is looking at abandoning the £100 penalty that he automatically imposes on people who file their self-assessment return late, a consultation suggests.

According to ‘HMRC Penalties: a discussion document,’ the plan is to see if penalties can “better differentiate” between deliberate or persistent non-compliance and “occasional error.”

Currently, the automatic penalty model “makes no distinction between a customer who misses a deadline by a day or two,” and someone who disregards the deadline entirely.

In the document, open for responses until May, HMRC adds: “[Automatic penalties are] more costly and resource intensive for HMRC to pursue than larger better-focused penalties.

“They also result in a substantial amount of customer contact for HMRC and so have an impact on the use of HMRC resources.”

The department points out that before February 2012 the late-filing penalty was cancelled if no tax was owed but, since then, the penalty has stood irrespective of an outstanding tax debt.

“Following this change,” reflects HMRC, “the proportion of on-time filing improved significantly, but it means some customers receive a penalty where there is no tax at risk.”

The Revenue also said the “reasonable excuse” provisions have been put in place so penalties can be removed, but it now recognises that the “rules may need updating” to better support taxpayers who genuinely want to comply.

Editor’s Note: Related Reading –

When there’s no penalty for an incorrect tax return

More self-assessors at risk of HMRC penalties

One-man bands get respite from RTI penalties

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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