New HMRC Penalty Proposals - time running out for consultation

UK taxpayers haven't much time left to submit their responses to HMRC's proposals for harsher penalties to late filing of tax returns and late payment of taxes, warns a leading accountancy firm.

UHY Hacker Young say that HMRC's proposals would, if adopted, "fundamentally undermine legal protection for taxpayers".

Summary of key proposals:
 

• Removal of the authorisation required from the General or Special Commissioners for HMRC to issue daily penalties
• An additional fixed penalty for late filing one month after the due date (in addition to the £100 fixed penalty already issued on or shortly after the due date)
  
• Tax-geared penalties of up to 100% of the tax owed for late filing
  
• Fixed penalties for late or non-payment of tax on or after the due date (currently fixed penalties of £100 are only issued for late filing of tax returns)
  
• One or two months after late tax is due tax-geared penalties, which would be a percentage of the tax owed
  
• Higher levels of penalties for taxpayers who repeatedly file or pay tax late

“Permitting HMRC to issue daily fines without authorisation from the General or Special Commissioners would remove a vital legal protection for taxpayers against the arbitrary use of power. Regardless of whether taxpayers could appeal, the balance is shifted firmly in HMRC’s favour, and would inevitably result in greater use of daily fines.”

“Allowing HMRC to set penalties for late filing up to 100% of the tax owed is quite extraordinary when you consider that 100% penalties are currently levied in fraud cases, which involve deliberate deception.”

He adds: “Interest charges on late payment of tax are already significantly higher than interest paid to taxpayers on overpaid tax. If HMRC is allowed to charge 30% on late tax, it seems only reasonable it should pay taxpayers 30% on overpaid tax when there is an equivalent delay in making repayments.”

The consultation document also sets out plans for treating taxpayers who repeatedly file or pay late differently from occasional late filers or late payers. HMRC suggests higher penalties the second or third time a taxpayer files or pays late. Businesses have until September 11th to submit their responses.