No one wants to get behind with their legal obligations, and paying what’s owed to the Tax Office, but sometimes it does happen.
In most cases, when a deadline is missed, or information hasn’t been provided – HMRC will issue a penalty, fine, or fee, the amount of which will depend on why it has been issued.
Some of the most common penalties or fines from HMRC include:
Late filing of Self-Assessment tax return – Starting at £100, with more added in interest and additional late penalties if it remains unpaid.
Late reporting of PAYE payroll – The starting figure is set at £100 (for 1-9 employees) and goes up to £400 (250+ employees)
A ‘default’ on paying VAT – No surcharge is levied for the first default, but if a 2nd default happens within 12 months, then you may be charged up to 2% of turnover (if the turnover is in excess of £150,000). Continued defaults add higher charges, up to 15% or £30 (whichever is higher).
VAT penalties may also include 100% of any under-stated or over-claimed tax on inaccurate returns, 30% of an assessment if HMRC sends you an assessment that’s too low and you don’t inform them within 30 days, and £400 if you submit a paper VAT return without meeting the conditions or being authorised to do so.
Late filing of CIS return – This starts at £100 for being 1 day late, and the penalty continues to increase, up to £300 or 5% of CIS deductions (whichever is higher) for being 12 months late. For returns that are over 12 months late, there may be an additional penalty of up to £3,000 or 100% of the CIS deduction on the return (whichever is higher).
Failing to Inform HMRC of Corporation Tax Liabilities – There are three types of penalty involved here, which are based on your actions: non-deliberate, deliberate (but not concealed), and deliberate (and concealed). The penalty is calculated on lost-revenue and ranges from 30% (non-deliberate) to 100% (deliberate and concealed).
HMRC puts the onus on you to inform them if there are extenuating circumstances, or good reasons for a form, return, or payment being late – and have a clear process for appealing and disagreeing with a tax decision.
In order to appeal against a fine or penalty, you will need to contact HMRC – this can be done by phone, email, letter, or in some cases – using an online form.
At a minimum, you will need:
Your National Insurance Number
Other relevant identification (such as Unique Taxpayer Reference [UTR] or VAT registration number)
The date the penalty or fine was issued
The details of why you were late
When considering your request, HMRC have a number of what they call ‘reasonable excuses’ and they will first look at your reason for the delay and determine whether you meet the criteria for having a reasonable excuse.
If you do, they may dismiss the penalties or fees involved, and will inform you of the outcome – as long as you’ve corrected the error, made the outstanding payment, or sent in the required form, you won’t need to do anything further.
If your penalty / fine is reduced, or upheld, you will need to make the payment within the timeframe allocated for the process. It may be that you continue to appeal the decision, in which case you need to send further correspondence to HMRC to inform them that you are upholding your decision to appeal, and that you are requesting a review – in most cases, HMRC will then pause the amount of interest or other fees being generated, until the review is concluded.
HMRC investigations can be long, involved, and costly – and if you are required to submit evidence, they will inform you what they need from you, and how long you have to provide it.
If you need help with managing your accounts, and determining whether a fee or penalty should be contested, we highly recommend that you book a consultation with one of our team – our experts have years of experience, and are on hand to help advise you on the best practice and process for your business and its accounting – and can give you an honest appraisal of whether you should appeal a penalty.
Find out how we can help you today, and get your business on the right track.
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