The Low Incomes Tax Reform Group (LITRG) is reminding people of their right, in certain circumstances, to contest penalties given by HMRC for missing the Self Assessment tax return deadline of 31 January 2019.
HMRC issued 1,040,000 late filing penalties for returns due for the 2014/15 tax year. There were one million late filing penalties issued for tax returns due for the 2015/16 tax year.1
If circumstances have prevented someone from complying with their tax return obligations, LITRG reminds them that they may be able to avoid a penalty by claiming they have a ‘reasonable excuse’.2
Head of LITRG Team Victoria Todd said:
“Most taxpayers will want to do everything they can to file their tax return to HMRC on time, however, sometimes that may not be possible and HMRC will automatically issue a late-filing penalty.
“Where someone thinks they have a reasonable excuse for having missed the deadline, they must provide details and, where possible, evidence in support of those details to HMRC. It may be that a combination of reasons, rather than any one thing, may constitute a reasonable excuse to HMRC.
“It is up to the taxpayer to appeal a penalty if they wish to claim they have a reasonable excuse. If HMRC agree with the appeal the penalty will be removed, however if they don’t, it is possible to challenge HMRC’s decision as HMRC do not have the final word on whether or not an excuse is reasonable; that question is ultimately for the courts to decide. If someone is unable to agree with HMRC, they can ask HMRC to review the decision and/or appeal to the First-tier Tribunal.
“If someone claims a reasonable excuse, they must comply with the obligation in question without further delay, for example, submit a late tax return as soon as possible. This is because the law on reasonable excuse requires people to remedy a default within a reasonable time after the excuse has ended.”
For example, if someone’s child was taken seriously ill just before they were due to submit a tax return, then that is likely to be a reasonable excuse for filing it late. But they would then have to submit the form as soon as possible after the situation was resolved.
LITRG is also reminding people that there is a tool on GOV.UK which enables people to estimate their penalty for late submissions under Self Assessment.
- The data covers penalties issued for returns due for that financial year, so not penalties issued in that year. These figures may have subsequently changed due to late returns being issued or late registration, resulting in further late-filing penalties being issued, these circumstances potentially having the biggest impact on the 2015/16 tax year results. HMRC no longer collate this information due to costs and a lack of a business need, and therefore it is not available for 2016/17 onwards.
- Examples of reasonable excuses could include:
- Problems with online filing. You may have been unable to access the HMRC online system due to lost passwords, etc. If you tried to file, though, and the system failed, you should be able to claim reasonable excuse;
- Unforeseen pressure of work. Normally this is not acceptable, but if you had a sudden unexpected and significant increase in work, this may be a reasonable excuse;
- You have an agent and they failed to lodge the return on time due to unforeseen circumstances. Normally this would not be a reasonable excuse, but if the agent’s partner, say, had died then HMRC might accept that. Of course, if an agent had all the information in good time and failed to provide a good service, then it may be possible to claim any penalty back from them;
- Physical or mental disabilities. Whether permanent or temporary, this could be viewed as a reasonable excuse if it affects your capacity to deal with your tax affairs;
- You did not understand the system and needed help from, for example, Tax Aid, Tax Help for Older People or from HMRC.
There are standard penalties for sending in tax returns late. These apply even if you do not have a tax liability. These are as follows:
- £100 – applied immediately the form is late;
- £10 per day – charged once the return is three months late for a maximum of 90 days;
- the higher of £300 or 5% of the tax due – applied if the form is six months late; and
- a further £300 or 5% of the tax due (whichever is higher) – applied if the form is 12 months late.