HMRC Late Filing Penalty Waiver – A Fiasco!

06 March 2015

The current personal tax self assessment system came into effect eighteen years ago. For 1996/1997 and subsequent tax years, we have had a dual filing date of 31 October and 31 January following the end of the tax year. Failure to submit a tax return on time has carried with it a one hundred pound penalty.

The recent leaked report that HMRC will not be challenging appeal cases regarding this penalty is evidence of the shambolic state of the UK tax system.

The one hundred pound penalty has not changed since it was established eighteen years ago. Looking to the consumer prices index one would have expected the penalty to have doubled, or thereabouts, since the inception of the late filing penalty regime in January 1998. It is perhaps unsurprising against this context that the cost of collection has become uneconomic.

The rule for tax returns up to 2009/10 was that the automatic late filing penalty was limited to the tax due. Given that in many cases this limited the penalty charge to zero, it was of course natural and predictable that the removal of this would have resulted in HMRC having to deploy additional resources upon chasing modest liabilities.

HMRC have stated  

"Our penalty regime is intended to influence customer behaviour, but also be clear and cost effective, fair and proportionate.”

"The current way of managing penalties does not meet these objectives, and so we have decided to take a more proportionate approach where a customer has filed their return late, and then appealed against their penalty.”


It seems likely to be the case that HMRC are looking at late filing penalties to ensure that they are cost effective going forward, and therefore providing clarity, fairness and proportionality. This suggests that we will now have an entirely different test for what is a reasonable excuse, where the penalty is only one hundred pounds in comparison to where the penalty is more substantial, even where the behaviour is essentially the same. Where this is in any way fair is beyond comprehension. 

For further information, please contact Nigel May or your local tax advisor