Taxman hounds a million innocent workers
TAX inspectors have been trying to fine up to one million innocent people hundreds of pounds each for late tax returns, The Sunday Telegraph can disclose.
HM Revenue Customs said that 963,000 taxpayers were found to be unnecessarily registered for self-assessment (SA) in the past two years and have now been taken out of the system altogether. None of the taxpayers had put in SA tax returns for three years yet were still being chased for late filing penalties by HMRC’s inspectors. The number of people affected represents one in 11 of the UK’s 11million people who are registered to pay tax in this way every year.
Last night Nicky Morgan MP, the chairman of the House of Commons Treasury select committee, said her committee would consider investigating why HMRC had been trying to fine the innocent taxpayers who did not have to fill in SA forms.
She said: “I appreciate HMRC have to deal with millions of taxpayers but they need to focus on those who really are trying to evade the tax system, not those who shouldn’t be filling in forms at all.” Self-assessment returns are required to be filed by individuals who are self-employed and do not pay tax through the pay as you earn system.
HMRC disclosed that it wrote off £283million worth of fines in 2015-16 and 2016-17 that it had been demanding from the taxpayers who had failed to submit SA returns for three years in a row. This means that each taxpayer was being unnecessarily chased for penalties averaging £300.
The tax department said that “these customers were therefore removed from the SA regime and are no longer liable for SA”. Tax accountants said the system of penalising taxpayers who do not submit self-assessment returns on time needed to be reformed urgently. Taxpayers who are registered for SA are charged an automatic penalty of £100 if a tax return is up to three months late.
George Bull, a senior tax partner at RSM, added: “It’s all very well for HMRC to emphasise that no money has been lost when the penalties were cancelled. This completely ignores the fact that the penalties should not have been issued in the first place.”
Frank Askew, head of tax in the Institute of Chartered Accountants in England and Wales, said the scale of the problem “would suggest that there are systemic problems with the taxpayer records that needed to be addressed, for example whether those returns were actually due”.
He added: “It is right that penalties should be levied on those who do not pay their taxes, but the system needs to be flexible and proportionate and not applied where penalties are not appropriate.”
An HMRC spokesman said: “We’ve removed 200,000 people from self assessment who are now paid through PAYE but might have forgotten to inform us.”
Last year HMRC was criticised for sending out “threatening” texts to selfassessment taxpayers warning that they were being “monitored”.