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A guide to HMRC late filing penalties, penalty appeals and reasonable excuses

4-minute read

A guide to HMRC late filing penalties, penalty appeals and reasonable excuses
Josh Hall

Josh Hall

18 January 2019

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We all do our best to avoid them, but sometimes small businesses and the self-employed can end up with a penalty from HMRC.

HMRC penalties can be expensive and stressful – but, thankfully, sometimes they can be appealed. If you have a reasonable excuse, you may be able to lodge an appeal against your penalty from the taxman, and hopefully have it waived.

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Why might I get an HMRC penalty?

HMRC’s rules around tax returns and other filings are strict. If you fall foul of them, you can expect to receive a penalty. Common reasons why HMRC might charge you a penalty include:

  • Inaccuracies on a return
  • Late filing of a return
  • Late payment of tax due
  • Failure to keep adequate records

What dates do I need to keep in mind to avoid a late penalty from HMRC?

Self Assessment deadlines

You need to register for Self Assessment by 5 October, and the deadlines for filing your return and paying your bill are as follows:

  • 31 October – file your return (if it’s a paper one)
  • 31 January – file your return (if it’s an online one)
  • 31 January – pay your tax bill

Self Assessment penalties

How long since the deadline?Penalty
One day£100
Three months£10 for each additional day, up to 90 days – plus the previous penalty
Six monthsWhichever is higher of £300 or 5 per cent of the tax you owe – plus the previous penalties
12 monthsAn additional £300 or 5 per cent of the tax you owe – or, in some circumstances, 100 per cent of the tax you owe

Company Tax Return deadlines

Your Corporation Tax return is due 12 months after the end of the accounting period it covers, and the deadline to pay your Corporation Tax bill is usually nine months and one day after the end of your accounting period.

Company Tax Return penalties

How long since the deadline?Penalty
One day£100
Three monthsAnother £100
Six monthsHMRC's estimate of your Corporation Tax bill plus 10 per cent of the unpaid tax
12 monthsAnother 10 per cent of any unpaid tax

What are the reasonable excuses for appealing an HMRC penalty?

If you receive a penalty, there’s a chance you'll be able to appeal. To do this successfully, you need to have reasonable grounds. These are extenuating circumstances that HMRC deem reasonable and serious enough to justify the reason why you've incurred a penalty.

Regardless of the excuse, HMRC will still want to see that you took reasonable care to meet your tax obligations. If this is the case but you still fell foul of the rules, you might be able to appeal on one of the following grounds:

  • You suffered a bereavement of your partner or another close relative shortly before the deadline for a return or payment
  • You had an unexpected hospital stay that meant you couldn’t meet your obligations
  • You suffered from a serious or life-threatening illness
  • The software you use to complete your returns failed just before the deadline, despite you taking reasonable care to maintain it
  • HMRC suffered its own technical problems - for example, the Self Assessment portal went down
  • You suffered a relevant fire, flood, or theft
  • You have a disability that prevented you meeting your obligations

How do I appeal an HMRC penalty?

The way you appeal your penalty will depend on the type of penalty you’re receiving. In every case, you must lodge your appeal within 30 days of receiving the penalty.

Appealing a Self Assessment late filing penalty

To appeal against the £100 fine for filing your Self Assessment tax return late, you first need to have either filed your return or told HMRC you don’t need to complete one.

If you’re appealing a penalty for the 2016-17 tax year, you can make your appeal using the Self Assessment online portal. Otherwise you should use form SA370, which you can download here.

Appealing a Corporation Tax or VAT late filing penalty

If you’re a business appealing against a penalty for filing a VAT or Corporation Tax return late, you can use your HMRC online account. You may also wish to use a particular form for a specific type of appeal. For example, you may have a reasonable excuse for filing a VAT return late, or IT problems may have stopped you from filing your tax return on time.

Appealing a PAYE penalty

If you’re an employer appealing against a penalty relating to PAYE, you should use your account at HMRC’s online PAYE for employers portal.

Who handles a penalty appeal?

Once your appeal has been lodged, it'll be investigated by an HMRC tax officer who wasn't involved in the original penalty decision.

Alternatively, if you’re appealing a penalty related to an indirect tax such as VAT or excise duty, you might choose to appeal directly to the tax tribunal. You can also request a review from HMRC if you’d prefer.

What if I disagree with HMRC’s decision?

If you disagree with the outcome of HMRC’s review of your penalty, you can make a further appeal to the tax tribunal. This is an independent body that’ll take evidence from both parties and then make its own decision.

If you want to take your case to tribunal, you must do so within 30 days of the review decision.

Alternatively, you might consider alternative dispute resolution (ADR). You can apply for ADR if you're not making any progress in your dispute with HMRC.

This process is primarily intended for businesses, but it may also be used by individuals in dispute about their personal tax.

During ADR, an impartial third party will act as a mediator between you and HMRC. The idea is that they will help you identify the areas that need attention and, where relevant, help to re-establish contact between the two parties.

ADR is particularly useful if you disagree with HMRC over the basic facts of your case, or if communication between you and HMRC has broken down.

However, you should note that you will not be eligible for ADR if you are appealing against a fixed penalty, or if you’re in dispute about a request for time to pay.

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