As the January 31 tax return filing came and went, taxpayers were warned that HMRC is starting to levy ‘super-penalties’ of up to 200% of tax owed on taxpayers who fail to file income tax returns, says UHY Hacker Young, a national accountancy group.
Recently, HMRC has changed the way it interprets the rules around taxpayers ‘deliberately withholding information.’ As a result, ‘super-penalties’ are being levied on some people who file their tax returns after the deadline, whereas previously those penalties were reserved for people lying on their tax returns or evading payment altogether.
In previous years, due to the COVID-19 pandemic, HMRC took a much more lenient approach to late filings. Taxpayers were given more time to file their returns and pay the tax before incurring penalties. However, they are not expected to extend deadlines this year, which means a £100 penalty if tax returns are returned late, increasing after three months and then £10 per day for the next 90 days.
However, there is the risk of a “super penalty” of 200% of tax owed if your tax return is more than12 months late and HMRC do not believe your excuses and think you have been deliberately withholding information.
HMRC’s new standard for ‘deliberately withholding information’ is demonstrated by two recent tax tribunal cases. In these cases, HMRC levied ‘super-penalties’ on taxpayers delayed filing returns for multiple years because they could not afford their tax bills.
Before, these very late filers would have been met with substantial but less extreme punishment.
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UHY Hacker Young tax partner, Graham Boar, said: “Punishing late filers in the same way as those who lie on their tax returns or evade taxes altogether will be seen as excessive by many.”
“There are all kinds of circumstances that cause people to file their income tax returns late. Most people who file after the deadline do so because they cannot afford the tax bill and hope that late filing gives them extra time to gather the funds. For others their personal and tax affairs get too much and they just try to forget about it.
“Blatantly lying on tax returns or evading tax payment altogether is a much more serious crime so it seems unfair that people who have filed late because of negligence should receive as harsh a punishment as evasion.”
“We saw cases ruled on in 2022 where taxpayers were subjected to super-penalties despite mitigating circumstances and an inability to pay.”
Tax returns filed on paper forms are due by October 31, while online returns were due by January 31.