8 September 2011

• Fines allowed to stack up 

HMRC is regularly delaying the issuance of penalty notices for late employer’s tax returns until the tax payer has built a sizeable bill according to our research.

A recent tax tribunal case (Hok Ltd V HMRC) confirmed that HMRC has been unreasonably delaying the issuance of penalty notices until the tax payer has clocked up £400 of fines.

If HMRC had issued the penalty notice in the first month – rather than delaying until the fourth month – the penalty would only have been £100 according to our research.

Rob Durrant-Walker, Senior Tax Manager at our York office, says: “We are seeing a steady stream of businesses who have fallen foul of this tactic. Waiting four months whilst the meter is running as a matter of policy to tell someone that their return is late is grossly unfair.”

“Many employers fail to submit their return through genuine mistake or oversight, and are not trying to evade their obligations. These higher penalties are disproportionate when an earlier reminder is often enough to tell them of their error. The tax profession has been pointing out the injustice of this to HMRC for some time.”

“HMRC is supposed to be in the business of getting everyone to pay the right amount of tax at the right time, and helping taxpayers to meet their obligations – not creating additional charges. We hope that HMRC now take this decision into account and amend their procedures.” 

Our research explains that the penalty notices for late submission of 2011 employer’s end-of-year returns (forms P35) will be coming out in the next couple of months and says that taxpayers should dispute the level of fines where HMRC has been particularly slow in issuing a penalty notice.

Rob Durrant-Walker