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Consider an appeal if you had a reasonable excuse for not filing on time, says Low Incomes Tax Reform Group
01/02/2016, by Low Incomes Tax Reform Group, Tax Articles - Income Tax
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The LITRG urges taxpayers who missed the Self-Assessment filing deadline on 31 January to appeal against penalties for late filing if they think they had a reasonable excuse.

Introduction

LITRG supports HMRC’s efforts to encourage people to file returns and pay tax due from them by the proper date. But it is concerned that some of those who did not make the deadline may not appeal against sanctions for late filing because they are not aware of their rights.

LITRG concern

The LITRG is concerned that people may feel panicked by penalty notices from HMRC and just pay financial sanctions for filing Self-Assessment forms late without considering that there may be excellent reasons for the delay in filing that may make them eligible for special treatment.
 
There is a danger that people wrongly think that the automatic £100 (min) penalty for those who missed the deadline by a day or two has been scrapped because the Government was consulting on possible reforms to the penalty system.

Extenuating circumstances

LITRG is reminding taxpayers that there could be extenuating circumstances where someone may be able to avoid a penalty by claiming a ‘reasonable excuse’ for filing their tax return late. These could include flooding or severe weather problems, but also life events such as serious illness or bereavement, and other causes beyond the taxpayer’s control.
 
It is important that, even if a reasonable excuse is established, the taxpayer files without unreasonable delay once the excuse has ceased. For example, when they recover from the illness that prevented them from filing their return on time in the first place, they must then file as soon as reasonably practicable. In all cases full details must be sent to HMRC and it may be that a combination of reasons, rather than a single reason, together may constitute a reasonable excuse.
 
An online copy of the form that may be submitted with a late tax return, claiming reasonable excuse, can be found on the gov.uk/HMRC website. If someone has received a penalty notice, an appeal notice will usually accompany it but, if not, the appeal notice can be downloaded from the GOV.UK website.

Inaccuracy penalties

On a related matter, LITRG has advice for people faced with inaccuracy penalties, which are chargeable if they submit an inaccurate return to HMRC that results in them understating their liability to tax or claiming too much by way of loss relief or repayment of tax. It typically amounts to 15 per cent of the tax understated. For a penalty to be properly chargeable, the mistake must be ‘careless’ or deliberate. ‘Careless’ indicates they have failed to take reasonable care; what constitutes ‘reasonable’ depends on the individual’s particular circumstances and abilities.
 
If a mistake is not careless but a genuine error made while exercising reasonable care, HMRC are not entitled to charge a penalty at all. This is the case even if the person’s tax liability is understated as a result of the error.

LITRG recommendation

If someone who is charged a penalty for inaccuracy in their return believes their mistake was not careless as defined by HMRC, then they should appeal against the penalty notice. It is important that people are aware of their rights and duties.

Useful links

Information about late tax return penalties
Severe weather helpline
GOV.UK/HMRC website
GOV.UK website

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice. LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit www.litrg.org.uk for further information.
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