The legality and effectiveness of waiving the £100 fine for a late tax return is being queried, despite the move receiving a warm welcome from taxpayers.
Nearly 900,000 people who missed the 31 January deadline for submitting their tax returns could be let off paying the fine. HM Revenue and Customs (HMRC) is set to waive the penalty for those taxpayers who can provide a “reasonable” excuse for delays in submitting their returns, according to a leaked memo.
The memo says that HMRC will now write-off the “vast majority” of fines as long as those concerned have subsequently paid their tax bill, The Daily Telegraph reported. The move was said to follow the build-up of a million-letter backlog at HMRC.
But critics believe that HMRC is failing to fully enforce the law. Richard Murphy, an independent tax researcher, said the move was “absurd”, “ethically wrong”, and showed that a “review of the penalty regime” was needed as well as an “overwhelming” need for a review of HMRC.
“If penalties are routinely found to be unjust, they should not be charged,” he said. “This action does, then, demand a review of the penalty regime. What this really shows is that HMRC is failing to impose the law. They are undermining the will of Parliament as they do not have the right to choose if and when they impose the law.”
The attack on HMRC was joined by a former chair of the Public Accounts Committee, the Labour MP Margaret Hodge, who suggested that tax rules had been brought into “disrepute” by the move.
She told the BBC: “Most people will get their tax returns in on time, so if HMRC says it is not going to pursue people who file late, it undermines the system. It won’t be seen to be fair. People can now simply look down the list of excuses and pick one.”
According to the leaked memo, the HMRC says its “penalty regime is intended to influence customer behaviour, but also be clear and cost-effective, fair and proportionate”.
The deadline for self-assessment returns for the 2013-14 tax year was midnight on 31 January, and HMRC is understood to have taken staff off call-centre duty to deal with the 890,000-strong backlog of forms.
On its website, HMRC states that a reasonable excuse for missing the deadline is “normally something unexpected or outside your control that stopped you meeting a tax obligation”. Crucially though, any excuse will only count if the outstanding tax bill has been subsequently paid.
Valid excuses include the recent death of a partner, an unexpected stay in hospital, computer failures, service issues with the tax authority’s online services, a fire which prevented the completion of a tax return or unexpected postal delay.
The move by HMRC is being seen as major change in procedure and has been seized upon by critics of the tax-gathering body. However, the measures will be replaced as early as October this year, when they will be superseded by a new “automated appeals tool”, according to the leaked memo.
A HMRC spokesman said: “We want to focus more and more of our resources on investigating major tax avoidance and evasion rather than penalising ordinary people who are trying to do the right thing.”Reuse content