HM Revenue & Customs (HMRC) in the UK has cancelled the smallest share of late filing and late payment penalties in four years, according to Price Bailey.
It did so despite issuing fewer penalties overall, the accountancy practice added.
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According to the data obtained by the company under the Freedom of Information Act, the number of penalties has been falling since 2019/20. However, the share of cancellations has fallen even faster, suggesting HMRC is taking a tougher stance on penalty appeals.
In 2022/23, HMRC cancelled 91,000 late-payment penalties, around 11% of the 857,000 issued. The figure was 16% in 2019/20.
Of the late filing penalties, around 674,000 out of 2.97 million were cancelled in 2022/23, compared to 1.2 million out of 3.1 million in 2019/20.
Price Bailey says the figures highlight the importance of taxpayers understanding when they must file returns and seeking help early if they cannot pay on time.
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By GlobalDataThe company notes that late payment penalties can often be avoided if taxpayers contact HMRC within 30 days of the payment deadline to agree a Time to Pay arrangement.
These plans allow tax debts to be spread over instalments and can prevent all three stages of late payment penalties from arising.
HMRC’s late-payment interest rate is currently 7.75%, making the cost of paying late the highest it has been in years. Price Bailey said that this makes early engagement with HMRC more important to limit both penalties and interest.
Price Bailey said many late-filing penalties occur because taxpayers don’t realise that they need to submit a return, and urged anyone who is unsure to check early.
HMRC will withdraw a notice to file – and cancel related penalties – only in limited circumstances and only if the return has not yet been submitted, meaning delays can make penalties unavoidable.
Price Bailey director Nikita Cooper said: “HMRC continues to issue hundreds of thousands of late-filing and late-payment penalties every year, many of which could be avoided.
“A significant number of taxpayers do not realise they need to file a return, and those who are struggling to pay could often avoid penalties entirely by engaging with HMRC early.
“The data suggests HMRC is taking a firmer line on cancellations. That makes it even more important for taxpayers to act early, because once a penalty is raised it is becoming harder to get it overturned.”
