It's very clear from comments made on Radio 4 this morning by HMRC that they have basically waived penalties for all taxpayers who appeal against penalties for sending in tax returns late.
I have already commented on this once today, but it seems worth doing so again (not least because I have had a lot of calls on the issue).
In my opinion what HMRC is doing now is ignoring the will of parliament. When self assessment was introduced into UK taxation significant penalties for filing to comply with the tax return submission system were introduced precisely to ensure that most people did so. Around 90% of people do so each year. Rather oddly, the 10% or so failure rate accords closely to the percentage tax gap.
And that is my point: HMRC not chasing these tax returns and allowing penalties to be avoided by those who file late, for whatever reasons so long as they are brazen enough to offer one, send out the message to tax cheats that tax compliance is voluntary.
That's great news for a government that wants reducing tax revenue as an excuse to cut the size of the state. It's a disaster for honest people and those who rely on public services.
I believe that what is happening here is not chance: it is part of the process of denying tax revenue to the government. And if that's the case then HMRC is acting both politically and beyond the law as well as ultra vires its powers and those responsible should themselves be brought to account.
Why, oh why, has Margaret Hodge given up the PAC?
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The unpalateable truth may be that lettng people off fines for submitting their tax returns late may actually be the will of this particular parliament!?
I wouldn’t put it past them.
These Tories would sell their mothers to curry favour with the ‘selectorate’ in order to stay in power.
I agree. HMRC are definitely sending out the wrong message to some taxpayers. Just as former permanent secretary for tax Dave Hartnett did when he personally negotiated that sweetheart deal for Vodafone back in 2011. I suspect HMRC are acting as they’ve been told to by government, which is something along the lines of don’t fight too hard to collect the taxes that are due as we need some justification for privatising what’s left of the public sector.
Something I’m not clear about Richard, is the accountability link of HMRC to government. I know the non exec board are in charge, but to whom are they accountable? Would be really helpful if you could jot down a quick explanation on that please.
There is no accountability for HMRC
No minister
No line of responsibility
Which is why we need one, to parliament and an Office for Tax Responsibility
Couldn’t agree more. I have my own business earn under 50k. I submitted my return on time in October but made a mistake, received notification months later an threat of a fine. Immediately responded. Then received a letter in March – I think following a fine letter saying sorry they had not sent my dues calculation yet but that I would be subject to a fine if I did not send full tax payment by the end of January! Feeling guilty that I have not yet learned to use the online system or calculate my tax correctly and knowing that my appeal would cost more than £100 to process, I decided not to bother.
Whether I should have been fined is debatable, but what is not is HMRC’s cost effectiveness argument. They are not adequately resourced to perform their proper function. A focus on economy and cost efficiency is undermining cost effectiveness and we are seeing it across all government departments. I work in international aid and have a strong academic interest in the way value for money arguments are being abused in DFID. Classifying the essential relational and learning work of civil servants as administrative and passing that on to the big profit making accounting firms through outsourcing is having a horribly negative impact on the effectiveness of the overall aid programme.
No one should think accounting objective or apolitical
Neither is true
Katy
Might I suggest that you use a professional tax advisor? You say you haven’t yet learned to use the on-line filing system and don’t know how to properly calculate your tax but employing an advisor would mean you didn’t have to and could allow the expert to help. The costs shoud not be too much for a small business such as you describe and you do seem to have got yourself in an unhelpful pickle.
For example, it’s troubling that you are threatened with a fine for not paying tax by the end of january as no such fine exists (although a surcharge applies to tax unpaid at the end of February).
A professional might even save you money by enabling you to claim currently missed legitimate costs! Overall, few of us would try and fix our own car or service our own gas boiler, we pay experts to do it for us but there seems a reluctance to employ experts to sort out the bewildering world of tax.
I agree: from experience I reckon I almost invariably added value to clients. Of course I could not always guarantee it, but most seemed to agree: they stayed year after year
My concern is that this will end up in small businesses who pay all their (fairly high) taxes being harrassed to show HMRC are “tough on tax”. We have yet to have a government who goes after big tax “avoiders” and often they defend these companies and people by making claims that they will leave the UK if we make them pay tax.
OK, how about this one? Where you complain that the light touch from upper management might be overidden by the local inspector and say that’s a bad thing:
http://www.accountancyage.com/aa/news/1774453/hector-penalty-crossfire
Experience let’s a wise man move on
You apparently are wholly unaware of that fact
What does that say about you
And your pedantry?
The will of Parliament, as set out in the legislation on penalties (I’m not at my desk at the moment or I’d cite the exact legislation; let me know if you’d like me to find it for you) is that there should be a £100 penalty if a return is filed late without a reasonable excuse.
Over the last few years HMRC have interpreted “reasonable excuse” as being something which is significant, unusual, and unpredictable. The Tribunals have fairly consistently pointed out that this is a far narrower reading than one would normally give the legislation, and that “reasonable excuse” should be interpreted broadly.
What HMRC now seem to be doing is accepting that broader interpretation.
You are correct that if HMRC blindly follow what taxpayers tell them then there is a risk that fraudulent behaviour will go undiscovered. The question then is where the burden of proof should lie.
I note that if a return is submitted late then it is still submitted, so the information HMRC require is made available to them and there is no loss of tax. It therefore seems to me that a late filing penalty should operate with a fairly light touch, to encourage prompt submission without discouraging compliance. As such, and for £100, I am happy that HMRC should not dedicate significant resources to challenging this sort of appeal.
A penalty for inaccuracy is a different matter, as this could lead to loss of tax, and so being so lenient may not be so appropriate in that situation. I note however that an inaccuracy penalty can be suspended to encourage future compliance, and I have found that this does have a good effect on taxpayers who are perhaps a little careless about their records. So if a certain degree of lenience has a beneficial impact in this area, I think a light touch for late filing penalties is also likely to be helpful.
After all, this is a very sensitive area – I find that clients who are charged a £100 penalty for something they think unreasonable are normally rather more fed up with HMRC than when they are charged £100 more tax than they think appropriate. Reducing the degree to which people feel unfairly treated is a good thing, in my book, as it encourages compliance and respect for HMRC and the law.
The £100 has worked to get tax returns in
Now it won’t
The resulting cultural shift at HMRC and in the taxpaying public is large, and unwelcome
As is the randomness of penalties that will follow
The penalty regime does need reviewing, and will be, but not like this