HMRC's Illegal Penalty Regime?

The Independent reveals that The Tax Tribunal has ruled that HMRC is operating a policy of “deliberately” waiting months before alerting small business that have not filed their tax returns, in order to accumulate late payment fines.

Under the current scheme HMRC waits until September before sending reminders out if firms fail to complete their end-of-year return by the May deadline. The reminder tells firms they are liable for four months of late-payment fees of £100 each plus a further £100 fine for late completion.

If upheld on appeal, the judgement could result in between 50,000 and 100,000 firms being able to claim refunds. Judge Geraint Jones, QC, comments: “It is no function of the state to use the penalty system as a cash-generating scheme”.

John Walker, national chairman of the FSB, welcomed the judgment, commenting: "We know that the department has been tasked with additional revenue raising targets but to intentionally allow, and target small firms to accrue fines when it is making deals with larger firms that owe millions of pounds is immoral”. Oliver Wright adds that HMRC’s cynical tactics undermine the British public’s faith in the fairness of the tax system.

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