Background
Where tax returns are filed late, penalties for the late filing can swiftly begin to rack up . As you can see from the table below you could incur a penalty of £1,600 for a return that is more than 12 months late.
Prior to the a recent appeal hearing, HMRC originally issued late filing penalties of £3,600 in respect of tax returns for two consecutive years being submitted late. However, these penalties have subsequently been cancelled and replaced by a smaller charge of £800.
| Late filing | Penalty |
| Missed filing deadline | £100 |
| 3 months late | Daily penalty £10 per day for up to 90 days (max £900) |
| 6 months late | 5% of tax due or £300 if greater |
| 12 months late | 5% or £300 if greater |
Appeal
Mr Mousavi felt that given an error on HMRC’s behalf he had a reasonable excuse for the late filing.
This error was that when Mr Mousavi had applied for a UTR it had been mistakenly sent to the wrong postcode by HMRC given an error in their systems. He therefore argues that, die to HMRC’s actions, it was not possible for him to submit the returns by the respective deadlines.
Decision
The first-tier tribunal found in Mr Mousavi’s reduced the penalties accordingly. Declaring their decision, they stated that it was “satisfied that the Appellant acted promptly and took advice once he became aware of his obligation to file a tax return although he remained subject to PAYE as an employee. There is clear evidence that the essential UTR was not received for a considerable period through no fault of the Appellant. The Appellant was not responding to a notice to file a tax return. Once the Appellant became aware that he would have to file two years of tax returns, the evidence shows that he acted with reasonable diligence and as a responsible taxpayer.” As such all penalties shall be quashed.
Implications
This ruling sets a precedent, if a taxpayer has been subject to a late filing penalty on the basis of an error in HMRC’s systems. As long as they have acted swiftly upon becoming aware of the problem that there is grounds for any penalties to be nullified.
