The existing penalty charges issued by HM Revenue & Customs (HMRC) for late filing of documents and making late payments could soon be a thing of the past, as officials consider a points based system for persistent offenders.
Thousands of taxpayers who miss the deadline for filing their self-assessment tax returns could escape being charged a penalty if new rules are introduced. Currently, anyone who misses the deadline for submission of their tax return will be charged an instant £100 fine, but HMRC has said that this may be viewed as unfair for those who make genuine mistakes or fail to meet the deadline just once. Also, it does not take into account whether the return is filed one day or three months late, with a £100 fine charged in either case.
Officials at HMRC have suggested that a new system operating in a similar manner to the points system for driving offences could be a fairer way to penalise repeat offenders. When points reach a pre-determined level by those who repeatedly miss deadlines, more severe penalties could be charged.
Last year, some families found themselves within the self-assessment system due to the child benefit cuts for those who pay tax at the higher rate. If they didn’t submit their tax returns in a timely manner, instant penalties were charged. According to data released by HMRC, 10.2 million people filed their returns on time, with 890,000 missing the deadline. For those who struggle to complete the tax return, accounting services are a cost effective solution, as an expert can assist with completion and ensure that the form is submitted on time.
HMRC has published a document to seek views on the current penalty system and whether it should be altered to be fairer to all. The organisation also wants opinions about how to differentiate between taxpayers who normally meet deadlines for payment and filing and those who deliberately and repeatedly fail to adhere to legislation. The feedback is wanted by HMRC from businesses and individuals as the organization seeks to hear views on the policy and suggestions for an alternative. Further discussion will take place at a later date.
Although HMRC acknowledged that penalties could encourage noncompliance if seen to be unfair, other experts believe that removing instant fines could remove the incentive to file on time. If you have any views on this subject, please give us a call.