Deadline day penalties: a subjective approach

January 31st is a date that every self- employed individual has in their diary. As discussed on Taxes UK, the deadline for returning self- assessments to HMRC is often missed by a large number of people. This year it is estimated that 890,000 individuals did not return their completed forms on time, automatically incurring a £100 penalty. 

HMRC’s penalty for late self-assessment is seen by many as an unjust way for the government to generate easy revenue. The automatic £100 penalty places every late return into the same category; meaning those who make an honest mistake or return the form a day late are treated the same way as those who are deliberately non-compliant. This system has previously been criticised for its lack of subjectivity. 

Filling out your self- assessment can be time consuming, especially if you are engrossed in your full- time occupation. Preparation is always key, and while £100 may not seem a great deal to some concerned, the combined sum of this year’s penalties equates to approximately £89m. Much of this figure is raised by those who have simply made an uncharacteristic mistake in filing their forms yet are categorised among those who intentionally disregard the rules for their own benefit and face what they may deem to be an inconsequential slap on the wrist. 

Not surprisingly, this has now been addressed as HM Revenue & Customs has admitted that its penalties regime may be too rigid, and is drawing up proposals to end fines for taxpayers who narrowly miss the deadline. 

We have been monitoring the progress of this, which has helped us give a useful insight for our clients; the initial proposals are now subject to public consultation. The proposals detail a new regime that would re-structure the way in which fines are calculated. In summary, the principal behind the proposed system is similar to that of motoring offences whereby you receive caution under the “points” principal. Therefore, more substantial penalties apply for more serious failures or for persistent non-compliance – potentially waiving punishment for first time offenders.