HMRC under attack over £100 fines for late tax returns

A charity has attacked the automatic £100 fine for late tax returns as "nothing short of oppressive" as it urged Revenue & Customs to overhaul the controversial penalties imposed on nearly 1m people a year.

The Low Incomes Tax Reform Group, representing taxpayers who cannot afford professional advisers, said that many people being fined had missed the deadline because of ignorance, ill health or bereavement.

In addition, about 200,000 people last year missed the deadline because they failed to press the "submit" button when they filed online, it said in response to an official consultation that closed this week.

Many taxpayers who were inherently compliant were caused "a very significant amount of distress, fear and worry" from the rapid escalation of penalties that could rise from £100 to up to £1,200 in six months.

HMRC announced plans in February to consider "whether we could better differentiate between deliberate and persistent non-compliers and those who might make an occasional error for whom alternative interventions are more appropriate".

It said: "There are 'reasonable excuse' provisions that can remove penalties, but the rules may need updating to better support those genuinely wanting to comply."

The decision to rethink the penalties comes ahead of the adoption of new technology giving it "more accurate, up-to-date data" that would allow it to take a more targeted approach to compliance, it said.

But it also reflects the backlash against the current system of automatic penalties that makes "no distinction between a customer who misses a deadline by a day or two and someone who has made no attempt to comply at all".

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Penalties were often a result of the limitations of HMRC's own processes, the LITRG said. For example, people often get sucked into self-assessment problems because they register as self-employed, even if only a few days of work actually materialises.

The campaign group cited numerous examples from TaxAid and Tax Help for Older People, charities that provide tax advice for people on low incomes. The charities that are seeking to raise £250,000 of extra funds, say they are facing growing demand for their services and had to turn away at least 6,000 people last year.

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