The Low Incomes Tax Reform Group (LITRG) is strongly urging taxpayers who miss the Self Assessment filing deadline on Wednesday (31 January) but who have a reasonable excuse for the delay, to challenge their penalties for late filing without delay.
LITRG is keen to support HMRC’s efforts to encourage people to file returns and pay tax due from them by the proper date, and has published articles and guidance on its website. But the campaign group is very concerned that some of those who for good reason do not meet the deadline, and receive a penalty in consequence, may be totally unaware that they can challenge it.
LITRG is reminding taxpayers that there could be extenuating circumstances where someone may be able to avoid a penalty by claiming what HMRC define as a ‘reasonable excuse’ for filing their tax return late.1 These could include flooding or severe weather problems, but also life events such as serious illness or bereavement, and other causes beyond the taxpayer’s control.
LITRG Technical Director Robin Williamson said:
“It is important that people are aware of their rights as well as their obligations, and are not alarmed unduly if contacted by HMRC. There is a danger that people may feel panicked by penalty notices from the tax office and just pay financial sanctions for filing Self Assessment forms late, without considering that there may be a legitimate reason for their delay in filing that may make them eligible for special treatment.”
Even if a reasonable excuse is established, the taxpayer must file without unreasonable delay once the excuse has ceased. For example, if illness prevented them from filing on time, they must file as soon as reasonably practicable when they recover from their illness. It may be that a combination of reasons, rather than a single reason, together may constitute a reasonable excuse. In all cases full details must be sent to HMRC.
An online copy of the form that may be submitted with a late tax return, claiming reasonable excuse, can be found on the GOV.UK website. If someone has received a penalty notice, an appeal notice will usually accompany it but, if not, a form SA370 Appeal can be downloaded from the GOV.UK website. People can also send in a letter to make an appeal. They must do this within 30 days of the penalty decision.
HMRC should then offer a review of the penalty decision. But HMRC are not the final arbiters of any dispute between them and taxpayers, and if someone disagrees with the outcome of HMRC’s review of their penalty, they can ask the tax tribunal to hear their appeal but they must do this within 30 days of the HMRC review decision. People can also consider alternative dispute resolution (ADR).
Aside from late filing penalties, HMRC may also charge a penalty if a taxpayer submits an inaccurate return to HMRC which results in them understating their liability to tax or claiming too much by way of loss relief or repayment of tax. It typically amounts to 15 per cent of the tax understated. For a penalty to be properly chargeable, the mistake must be ‘careless’ or deliberate.
‘Careless’ indicates they have failed to take reasonable care, but what constitutes ‘reasonable’ care depends on the individual’s particular circumstances and abilities. For example, a mistake which may be deemed reasonable for a pensioner with no prior knowledge of the tax system may not be thought reasonable if perpetrated by a qualified lawyer or accountant (see link here).
If a mistake is not careless but a genuine error made while exercising reasonable care, HMRC are not entitled to charge a penalty at all. This is the case even if their tax liability is understated as a result of the error.
Robin Williamson said:
“If someone who is charged a penalty for inaccuracy in their return believes their mistake was not careless as defined by HMRC, but an honest mistake despite taking reasonable care, then they should contest the penalty notice.
“As with challenging a late filing penalty on grounds of reasonable excuse, they can ask for their case to be reviewed by a different officer from the one who made the decision and/or have their appeal heard by an independent tax tribunal.”
Notes for editors
1. A reasonable excuse is normally something unexpected or outside your control that stopped you meeting a tax obligation, for example:
• your partner or another close relative died shortly before the tax return or payment deadline
• you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
• you had a serious or life-threatening illness
• your computer or software failed just before or while you were preparing your online return
• service issues with HMRC online services
• a fire, flood or theft prevented you from completing your tax return
• postal delays that you could not have predicted
You must send your return or payment as soon as possible after your reasonable excuse is resolved
2. It was reported that 10.8 million people submitted their annual tax returns by midnight on January 31 2017. However, 840,000 people had run the risk of a £100 penalty for failing to meet the Self Assessment deadline for signing off their 2015-16 tax affairs. Link here.
3. LITRG’s website provides more information about penalties, see: http://www.litrg.org.uk/tax-guides/tax-basics/when-things-go-wrong/tax-penalties
4. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 17,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk (Out of hours contact: George Crozier, 07740 477 374)More Articles by Chartered Institute of Taxation (CIOT) ...