HMRC impose penalties for a number of self-assessment issues, including late filing and payment, and tax return errors. These penalties can signal the start of cash flow problems, as well as bringing businesses to the attention of HMRC.
There may be recourse for appeal if you’ve incurred an HMRC penalty, but before we look at the appeal process, here are some of the causes of self assessment fines in more detail, and the penalty rates that currently apply.
‘Failure to Notify’ and late notification penalties
If you’re liable for tax and didn’t complete a tax return last year, or you’ve started a new business, you must notify HMRC of your liability to pay tax. Failing to do so, or notifying late, can lead to penalties being applied. The penalty will be based on the amount of tax due, but also on whether HMRC believe your failure to comply was deliberate.
Late filing and late payment
A penalty of £100 is issued for tax returns filed up to three months late. Subsequently, a daily penalty of £10 can be applied by HMRC for up to 90 days, or a total of £900. From six months onwards, 5% of the tax due, or £300 if that is the greater amount, will be charged. For late payment, the penalty is 5% of the outstanding tax due, unless a Time to Pay arrangement is made with HMRC.
You may be successful in making an appeal against late filing or payment penalties if you can provide what is known as a ‘reasonable excuse.’
What is a ‘reasonable excuse?’
A reasonable excuse may include, but is not limited to, one of the following:
- You were unexpectedly taken into hospital
- You suffered a serious/life-threatening illness
- The death of a partner or close family member
- You experienced hardware or software issues whilst completing your tax return, or HMRC services were not operating as they should
The reason for late filing or late payment should have continued throughout the overdue period, otherwise the penalties are likely to stand. Examples of ‘unreasonable’ excuses include failing to understand how the online self assessment system works, and not receiving a reminder to file from HMRC.
Handpicked Accountants can refer you to a qualified tax accountant in your area, who will advise on making an appeal for self assessment. We only recommend accountants with whom we have longstanding working relationships, so you know that our referrals are based on practical experience.
Making a self assessment appeal
The appeal should be made to HMRC within 30 days of the penalty notice, and this can be done online for fines of £100. Penalties over £100, for late filing or late payment, should be appealed by post using Form SA370, or Form SA371 for partnership tax returns.
You can also phone HMRC, but if they don’t agree to set aside the penalty you’ll need to make an appeal in writing. Under certain circumstances an appeal made after 30 days may be accepted, but this is entirely at HMRC’s discretion.
HMRC will let you know in writing whether or not your appeal is successful - if so, the penalty and any interest on the penalty will be paid back to you. If your appeal was unsuccessful, HMRC have a review system whereby your case can be looked at by another HMRC officer.
This can be helpful if you need to provide further information or evidence about the situation that caused you to file or pay late. There is also recourse for further appeal via the First Tier Tribunal (Tax) – you can make a written appeal, or appear in person at the tribunal to state your case.
Is there a penalty when a taxpayer is not self-employed?
If you receive a self assessment penalty but are not self-employed, you can contact HMRC and request they withdraw the notice to submit a tax return. This request must be made within two years of the tax year-end.
The penalty may be ‘set aside’ if you receive all your income via PAYE, it is taxed savings income, or there was no income on which tax was due that year.
Handpicked Accountants can help you find a qualified tax accountant to make the self assessment process easier. We work with accountants nationwide, and will provide a number of trustworthy recommendations for professionals in your area.