HM Income and Customs (HMRC) cancelled 46,266 tax return penalties final yr, the very best quantity on report, based on its newest annual accounts.
The surge in cancellations—up 29% from the earlier yr—pertains to automated fines issued for missed self-assessment and VAT deadlines. Taxpayers can enchantment penalties in the event that they filed late by no fault of their very own or have been mistakenly requested to finish a tax return.
HMRC attributed the rise in overturned penalties to the introduction of a brand new VAT penalty regime in January 2023, which made it simpler for companies to enchantment by their on-line accounts.
Andrew Park of Worth Bailey mentioned delays in banking, administrative failings by HMRC, and poor customer support contributed to taxpayers submitting late.
Within the first half of 2024–25, HMRC did not reply 35% of telephone calls, lacking its 85% goal. Its customer support ranges have since improved as a result of deployment of additional advisers.
Most of the cancelled fines have been issued to people who finally owed no tax. Park mentioned: “Late submitting penalties are disproportionately levied on individuals on low incomes, lots of whom don’t have any tax to pay.”
Latest knowledge obtained by way of freedom of data request revealed that 600,000 penalties have been issued up to now 5 years to individuals incomes under the tax-free private allowance.
Suppose tank Tax Coverage Associates has known as on HMRC to scrap late penalties for these incomes underneath £12,570.
HMRC has launched a brand new points-based penalty system for taxpayers within the Making Tax Digital programme. Underneath the brand new system, fast £100 fines not apply, and penalties are capped at £200 per tax return.
These outdoors the programme stay underneath the earlier regime.
In whole, HMRC issued 9 million penalties final yr, up from over eight million the yr earlier than.
Park added: “When two-thirds of appealed penalties are overturned, but solely a small fraction of the 9 million issued are challenged, it suggests a big variety of taxpayers could also be paying penalties they may efficiently contest.”
HMRC asks people who not must submit a tax return to tell them earlier than the 31 January deadline.
A spokesperson for HMRC mentioned: “Our penalty reforms allow prospects to enchantment simply and rapidly on-line in opposition to each penalties and penalty factors. Our new points-based system means solely those that persistently miss deadlines will incur a monetary penalty.”
