A new penalty regime was introduced in April 2011 for those who do not meet filing deadlines. HMRC says the penalties are to motivate taxpayers to file their returns on time and to reduce HMRC's own costs for chasing outstanding returns. Needless to say the new penalties are higher than previously and are not automatically reduced to nil even where a person has paid all the tax due by 31 January 2012 or where there is no tax to pay.

Despite the above change, 500,000 people have still not submitted their 2010/11 tax returns (which were due by 31 January 2012). The result is that from mid-August HMRC started issuing additional penalty letters. These penalties are for a minimum of £1,200 and are made up of:

  • the maximum £900 in daily penalties for non-filing delays in excess of three months
  • a further late-filing penalty of £300 or 5% of the tax due (whichever is higher) as the return is more than six months late.

The above is in addition to the original £100 late filing penalty and a further £300 penalty will be issued if the return is not submitted within 12 months.

Extenuating circumstances

If there is a 'reasonable excuse' why a return has not been filed (e.g. a family illness or a bereavement) it may be possible to successfully appeal against the penalties raised either in whole or in part.

However, the longer a person takes to file their return, the less likely any appeal will be successful as HMRC would argue that the extenuating circumstances do not apply to the same extent.

Should you be in self-assessment?

HMRC has already taken 273,000 people out of self-assessment this year and it may be that there are many in the regime who do not need to be. Therefore, HMRC has advised that where someone can demonstrate that they do not need to be in self-assessment it will cancel the penalty.

For some of those issued with a 2010/11 tax return there is still potentially the opportunity to be taken out of self-assessment and have their penalty cancelled.

Summary

Any individual who has been issued with a penalty notice should take specialist advice as soon as possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.