HMRC: act now to avoid late tax fines

Letters from the taxman rarely include good news, but the latest batch, which have gone out to 7,000 people who owe tax from the financial year 2009/10, offer a chance to cut down any fines due.

Those taxpayers who have failed to submit self-assessment tax returns and now owe money to HM Revenue & Customs have the chance to cut the figure they may be fined for the late return. But to do so, forms need to be returned and tax paid by the 2nd October.

This is all part of a new HMRC campaign called ‘The Tax Return Initiative’ which was launched back in July to encourage people to come forward if they owe money.

The Tax Return Initiative 

Although the new campaign is largely aimed at higher-rate taxpayers, it is open to anyone and relates to the tax years up to and including 2009/10.

If you come forward and submit missing forms before the deadline next month you’ll be liable to pay between 10-20% of the tax due as a late penalty. Normally the fine can be up to 100% of the outstanding amount.

The quickest way is to do this online but you will need to register first for HMRC Online Services which can take a few days. You can register on the website or by calling 0845 601 8818.

What happens if you don’t pay?

If you’ve not paid, you’ll already be facing a significant fine. This campaign gives you the chance to get your taxes up to date and return any money owed, while paying a much smaller fine.

[SPOTLIGHT]For those people who still don’t return any unpaid tax, HMRC says it will conduct its own investigations and the penalties will be a lot harsher if it finds you have ignored this warning. This could lead to paying up to 100% of the tax due in fines or a criminal investigation.

It says it’s completed 18,000 investigations, and 23 criminal cases are under way, so if you’re burying your head in the sand about tax that’s due it would be a lot better to come forward now.

HMRC fee system

The latest initiative doesn’t apply to people who have forgotten to fill out and return a self-assessment form for the year 2010/11. These people will have been contacted back in February and March as the forms were meant to be sent in January.

If you’re in this boat, you could now be facing fines of up to £1,200 for late returns, as HMRC’s new fine system came into place in April.  

In the first instance people with late returns were given automatic £100 fines. Then it’s £10 a day fine for three months which is capped at £900 plus 5% of the tax due (a minimum of £300).

After six months, a further penalty of 5% of the tax due or £300 (whichever is greater) is added. And after 12 months, another 5% or £300 charge. In serious cases, the penalty after 12 months can be up to 100% of the tax due.

How to appeal against HMRC fines

It is possible to appeal if you’ve got a reasonable excuse such as family illness or death or if you received a late filing penalty but don't think you should ever have been in the self-assessment system in the first place. If HMRC agrees the fine will be cancelled. 

The appeal needs to be in writing and it needs to be sent within 30 days of when you received either a penalty notice or a decision on the tax you owe from HMRC.

Within the letter you need to include details on why you’re appealing, such as if you think your tax return was sent on time, if you have a reasonable excuse for missing it or if there’s been a mistake. HMRC will then get in contact, by post, and tell you its decision.

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