Self-Assessment Penalties 2017-18

Based on recent years HMRC will potentially issue at least 1 million late filing penalties..

Late filing penalties are as follows:

  • £100 penalty immediately after the due date for filing. This applies even if there is no tax to pay, and whether or not the tax has been paid by the due date;
  • daily penalties of £10 per day for returns that are more than three months late, running for a maximum of 90 days;
  • if the return is still outstanding six months after the filing date, a further penalty of 5% of tax due for the return period or £300, whichever is the greater;
  • if the return is still outstanding 12 months after the filing date, a further penalty of 5% of tax due for the return period or £300, whichever is the greater; and
  • higher penalties of 70% of the tax due where a person fails to submit a return for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax due (increasing to a 100% penalty if deliberate with concealment).

Time to pay

HMRC can suspend late payment penalties where the taxpayer agrees a Time to Pay arrangement and the tax is paid over a period of time.

Reasonable excuse

Penalties can be avoided if the taxpayer has a ‘reasonable excuse’.  For example, if the taxpayer was suffering a serious illness which prevented him managing his affairs.

There are several other situations that HMRC may consider as a reasonable excuse:

  1. Where the deadline was not met because the taxpayer did not receive the return;
  2. Where the return was posted in good time but an unforeseen event disrupted the postal service;
  3. Where the taxpayer or agent lost his records as a result of fire, flood or theft;
  4. A close relative or domestic partner died shortly before the deadline;
  5. A close relative or domestic partner had a serious illness shortly before the deadline;
  6. Where the taxpayer is in prison.

It should be noted that there are some situations that HMRC will not accept as a reasonable excuse.  Examples of these are:

  1. The return is too difficult to complete;
  2. Pressure of work;
  3. Failure by the taxpayer’s agent (although there is a tax case that refers);
  4. Lack of information to complete;
  5. Absence of reminders from HMRC.

The onus is on the taxpayer to provide enough details to determine if the reason or reasons existed at the time of the default.

 Challenging penalties

If HMRC agrees with the appeal the penalty will be removed, however, if HMRC does not agree, it is possible to challenge HMRC’s decision and an appeal taken to the First-Tier Tribunal.  A tax return should also be submitted as soon as possible as the default must be remedied as soon as possible. Please share this article with your clients