Late Filing Penalties- the new point system.

The current late filing system at HMRC has its faults. Many people who unknowingly miss the self-assessment deadline, are penalised instantly. HMRC are looking into changing the rules, to ensure those who have inadvertently missed a deadline will not be punished for a simple mistake.

Treasury is planning to instate a “holistic” points-based system instead, where immediate penalties would be replaced by a £100 four-strikes system. You will only be fined £100 if you miss the deadline four times. According to a source at HMRC, these adjustments made on the current ruling system is based on punishing repeat offenders and “people who really don’t care about playing by the rules”. This gives the opportunity to genuine taxpayers a chance to learn from their poor judgement in the past.

Right now, taxpayers face a fine of £100 when the self-assessment tax return deadline on the 31th of January is missed, which could rise based on the time passed after the deadline. After missing the tax return by more than three months, the fine will be either £300, or 10% of the tax that is due. In 2017, 840,000 people missed their deadline.

Similar to the current system regarding driving infringements, the soon to be implemented points system for the self-assessment tax-return system will have limit of four points. One missed deadline will equate to one penalty point. Another resemblance with the points system of the DVLA (Driver and Vehicle Licensing Agency), is the fact that your score resets after a period of compliance.

The Chancellor of the Exchequer, Phillip Hammond, stated in 2017 that there would be a new penalty system implemented for missing tax returns more often than once. According to Chancellor Hammond, the new tax system will ensure a fair approach to those who had no malicious intent.

The Senior Policy Adviser at the ICAEW (Institute of Chartered Accountants in England and Wales), Anita Monteith, had also commented on the implementation of the new system. She claimed this would help people to learn from their mistakes rather than having to pay for them right away. On top of that, Monteith commented on the fact that self-assessment tax can be a complicated issue for the average person, and that late filing penalties for small mistakes are an unnecessary evil.

According to the Association of Taxation Technicians, the new late filing penalties system is fair, yet there is a possibility of a scheme that can be taken advantage of by persistent transgressors. A source within the ATT said that there needs to be a ‘comprehensive consultation’ before making any judgements on the new points system.

There have been calls from tax-specialists to replace the current system with the new points system as soon as possible, and to make amends to those that have been penalised unfairly due to the new system.  The Vice President of the ICAEW voiced his displeasure about the failure to re-instate penalties and return fines paid by first time offenders.

HMRC has not yet confirmed a “live” date for the new points system so at present fines will still be issued even for first time offenders.

At TFMC we can help you ensure you never miss a deadline and remain point free! Call us now, or use our contact form if you would like to speak with your local TFMC about the impending tax changes.

Kass Verjee
Kass Verjee

Kass is not only a qualified bookkeeper/accountant but he is also a Fellow of The Institute of Chartered Accountants in England and Wales and has a full practising certificate.