HMRC Indulges In a Spot of Penalty Farming

Oh dear, it seems that HMRC is to delay sending out late filing penalty notices to taxpayers who failed to file their self-assessment tax return by 31 January, until April 2019.

Now at first glance that may seem to be a "nice" gesture, whereby no penalties etc will be levied until April.

Sadly, this being HMRC, nothing is ever as simple  or as "nice" as that.

AccountingWeb notes that around 700,000 taxpayers failed to meet the 31 January 2019 deadline for filing their 2017/18 tax return, so they are due to receive an automatic £100 late filing penalty. The letters informing taxpayers that this penalty has been charged are normally issued in February, but this year HMRC will not start the process of issuing those penalties until April 2019.

The £100 penalty will still be due, but the taxpayer won’t know that they have been charged.

HMRC says the latest date that late filing penalties for 2017/18 tax returns will be issued is 30 April.

Given that a letter from HMRC can take over a week to arrive, taxpayers may not realise that their tax return hasn’t been recorded as received by HMRC until well into May. Many taxpayers will also be away on holiday in late April due to the Easter bank holidays.

Here's the "fun" bit, If a SA tax return is over three months late, ie not logged as received by HMRC by 1 May, daily £10 penalties are charged for every additional day the return is late, until the return is six months late. Then another automatic late filing penalty is issued, at the rate of £300 or 5% of the outstanding tax, whichever is the greater sum.

Aha!

Therefore by delaying notification of the penalty, HMRC is stacking the cards in its favour for raising extra fines at the rate of £10 per day. That, by the way, is known as:

"Penalty Farming".

 

HMRC claim that the delay in issuing penalty notices is due to lack of adequate resources within the department. A decision has been taken to free up call centre staff to deal with calls relating to the UK leaving the EU.

HMRC said:

“This year, we expect an increased demand in our call centres as the UK leaves the EU, so we intend to delay the issue of these notices to ensure we can provide the best service to our customers. This will release those staff for EU Exit related work.

The vast majority will be aware they missed the January 31 filing date, as we do remind regularly with nudge messages before the deadline.”

As Rebecca Cave, in her article, notes HMRC has known about the Brexit date of 29 March 2019 for almost two years, but it has failed to plan to have adequate resources available to deal with an expected surge in enquires from taxpayers. However, taxpayers are penalised if they fail to meet the tax return filing deadline.   

Tax does have to be taxing.

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