Any excuse will do to avoid £100 Self Assessment Penalty

the dog ate my homework

On Saturday the BBC announced..

People who have filed late tax returns have been let off paying a £100 fine for missing the deadline, HM Revenue and Customs has confirmed.

But the penalty has only been waived for individuals who provide a “reasonable” excuse for being late.

According to the BBC HMRC will not be checking the excuses as in previous years, they will simply accept them without questioning them.

So what are reasonable excuses?

Here are some excuses that HMRC have accepted

  1. a failure in the HMRC computer system
  2. your computer breaks down just before or during the preparation of your online return
  3. a serious illness, disability or serious mental health condition has made you incapable of filing your tax return
  4. you registered for HMRC Online Services but didn’t get your Activation Code in time
  5. it was lost in the post HMD Response International v’s HMRC 2011 The accountant produced a contemporaneous note in his office diary for 16 May showing that he had filed the return.
  6. “Impecuniosity”Maxine Barron v’s HMRC
  7. Cashflow difficulties caused by a change in CIS Status Kincaid v’s HMRC 2011

HMRC open discussions on Penalties

Scaring amounts

On 2nd February 2015 HMRC launched HMRC Penalties: a Discussion Document

Closing date 11th May 2015.

HMRC state…

We don’t use penalties as a way of raising revenue, or to offset our running costs. In essence, we want compliance, not penalties.

Do you think HMRC penalties are fair? do they work? how could the system work better?

Why not use the discussion document to help HMRC to change the system and improve the way penalties are applied.

HMRC – More sanctions against tax avoidance schemes

UK tax return form

Since 2010 there have been 42 changes to tax law to close loop holes and deter tax avoidance.

Key changes were Accelerated Payments and High Risk Promoter Rules.

There is new consultation document out now ‘Strengthening sanctions for tax avoidance’ which runs till 12th March 2015.

A serial avoider may:

  • Use a number of tax avoidance schemes each year that were intended to offset their tax liability several times over in the hope that at least one will work.
  • Repeatedly use tax avoidance schemes to shelter the same type of income year after year.
  • Repeatedly use avoidance schemes to cover the majority of income or gains as they arise.
  • Often use tax avoidance schemes to cover major life or commercial events.

The new sanctions are expected to include:

  • Surcharges on repeated or concurrent use of tax avoidance schemes
  • Being compelled to provide more documents and records
  • Stop notices
  • Name and shame

Will this end the use of tax avoidance schemes?


5 ways to reduce the risk of a tax investigation

UK tax return form

THE TAX YIELD derived from HM Revenue & Customs investigations into the affairs of small- and medium-sized companies rose by 31% over the last 12 months, according to UHY Hacker Young.

Compliance investigations into SMEs generated £565m for HMRC in 2012/13, up from £434m in 2011/12, with the year ending March 31. Accountancy Age

Some investigations are random and some as a result of HMRC task forces, but many are triggered by risk profiling.

What can you do to reduce your chances of being selected:

1. File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return

2. Declare all your income – HMRC get details of bank interest and other sources of income, sometimes they test them and match them to returns

3. Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing

4. Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund

5. Tax Avoidance Schemes – if you are using a tax avoidance scheme I am sure HMRC will be looking closely, if they can find a way to challenge the scheme then at some point they will





Everybody has to pay tax but what if HMRC get it wrong?


Tax Return Due Now

If you don’t file your tax returns HMRC will assess the amount of tax due but it will probably not be the correct amount. So what can you do to correct the tax payable?

Overpayment Relief

A person can claim overpayment relief to recover overpaid income tax, CGT, Class 4 NIC or corporation tax or to reduce an excessive assessment. A person can claim overpayment relief to recover overpaid bank payroll tax or to reduce an excessive assessment.

This includes amounts paid under a contract settlement.

Special Relief

This is an important ‘relief of last resort’ for taxpayers who have missed all other deadlines and face a tax bill from HMRC, where there is no statutory right to amend the actual legal liability because the relevant time limits have passed.

Special relief is intended as a final and exceptional remedy where it would be unconscionable for HMRC to pursue tax that is legally due. HMRC has a duty to both Parliament and taxpayers generally to collect the tax due under relevant tax law and to ensure the tax system is operated fairly. This means that HMRC cannot simply disregard the time limits for making a self-assessment if it appears that a determination might be excessive. There must be further circumstances which make it unconscionable to recover the full amount due under the determination or not to repay an amount already paid.

Such circumstances might be where a person

  • is suffering from a temporary or sporadic illness, including mental illness, and consequently finds it particularly difficult to engage with the tax system
  • has not received our notices or other communications for reasons outside their control
  • is insolvent. Where the debt is based on determined sums, and the late submitted evidence (or returns) prove that a different amount would have been due if returns had been made in time, we would consider using this relief. Relief would be considered where doing so is fair to other creditors – so the unconscionable element would be that pursuing the amount in the determination would be to the detriment of other creditors.

For a claim to special relief to be successful, it must, among other things, explain why the person considers that it would be unconscionable for HMRC to recover the full amount charged by a determination. Unconscionable means “completely unreasonable” or “unreasonably excessive”. SACM12240

Penalty Mitigation

HMRC may in their discretion mitigate any penalty, or stay or compound any proceedings for recovery thereof, and may also, after judgment, further mitigate or entirely remit the penalty. TMA70/S102.

Mitigation will be considered in three circumstances.

  1. Where some sort of HMRC maladministration, usually delay, has caused or contributed to the size of the penalty – where delay and/or lack of co-operation by the taxpayer have caused the department additional costs that will weigh against mitigation.
  2. Where to enforce payment of the penalty would cause the taxpayer genuine and absolute hardship.
  3. Other exceptional circumstances such as the penalty or penalties being wholly disproportionate to the offence – for example a large tax-geared failure penalty under S93(5) following upon very large S93(3) daily penalties for the same offence, or belated information revealing the type of situation set out at EM5212 (“In-built” penalty).

There is no appeal against HMRC’s decision on S102 mitigation and a taxpayer wishing to litigate would need to seek Judicial Review.