Partner Article

HMRCs Hallowe’en deadline - a new headache for Tax In-SPECTREs?

Individuals intending to file their annual 2012/13 Self-Assessment tax returns on paper have until 31 October to do so or face the possibility of penalties.

Under the Self-Assessment regime, HMRC is able to impose a variety of penalties depending on how late the return is. These start at £100 for missing the deadline, but where the failure continues for over 3 months then the penalty escalates by a fixed £10 per day up to a maximum of £900. Where the failure continues for more than six or twelve months, there are further penalties of £300 and 5% of the tax liability, whichever is the higher. For ‘paper’ filers who miss the 31 October deadline, the daily penalties begin to bite on 1 February 2014.

But is this correct? Normally, HMRC will only countenance appeals on ‘reasonable excuse’ grounds. However the decisions in a couple of recent Tribunal cases may provide further opportunities for taxpayers to argue that daily penalties at least are not due.

The hearings centred on whether HMRC had given valid notice of the intention to charge the daily penalties and the date from which they would apply. In both instances, the Tribunal ruled that the communications issued to the taxpayers could not be classed as valid notices and concluded that HMRC could not charge daily penalties.

Unsurprisingly, HMRC does not agree, and is taking one of the two cases to appeal. They have indicated that ‘the outcome could have a bearing on all daily penalties HMRC has charged for the late filing of tax returns from 2010/11 onwards’.

It would appear, therefore, that there is real doubt as to the validity of all such daily penalties to date and the result of the Upper Tribunal hearing will be awaited with interest.

This was posted in Bdaily's Members' News section by Baker Tilly .