The penalties for filing a late tax return can be high. You can also be penalised for filing a tax return with erroneous information, with the penalties becoming even harsher if HMRC deem that you've deliberately tried to mislead them. Depending on the nature of your case, you may be able to appeal against any fines you've been issues with. Our guide below should help you gain more of an understanding of the process...
Asking for return to be withdrawn
If you were not required to fill in a return for the year which the penalties were applied, you can simply ask HMRC to withdraw the return. This may be applicable if you were taxed at source (via PAYE etc.), or if you had no taxable income for that tax year. This wouldn't be the case though if you apply to withdraw a return due to having no tax liability. So for example, if you're self employed and file no return due to your taxable profit being within your personal allowance; you're still likely to be penalised.
Appealing against a penalty for late returns
HMRC stipulate that late filing penalties can be appealed against if you have a 'reasonable excuse' for doing so. You'll need to file your late tax return as soon as possible, then make the appeal against the fines, after you've received notification from HMRC. Once your penalty notice has been issued, you should appeal within 30 days, however late appeals may be considered in extenuating circumstances. If your appeal is late and HMRC refuse the application, you can have your case reviewed by the Tax Tribunal service.
Your tax return is expected to have been filed within 14 days of the end of the 'special circumstances' which caused the late return. To make your initial appeal to HMRC you'll need to fill in form sa370, or sa371 for partnerships. If your appeal is refused you should first consider writing to HMRC to ask for a review, particularly if you missed out any significant information in your original appeal letter. Failing this you can appeal to the First Tier Tribunal (tax) for a neutral review of the case.
To have your penalty cancelled you'll need to provide a 'reasonable excuse'. HMRC consider whether the reasonable excuse continues throughout the period from missing the return date, to shortly until you file the self assessment. Obviously documented evidence will help prove your case, but if HMRC deem that only 'some' of the late period is due to special circumstances, you may only be exempt from some of the fines.
The HMRC website defines a reasonable excuse as 'something unexpected or outside of your control' and gives the following examples:
- Your partner died shortly before (or on) the payment deadline
- You had an unexpected stay in hospital that prevented you from dealing with such affairs
- Your computer software failed shortly before the deadline
- Service issues with HM Revenue and Customs online services
- A fire or other event prevented you completing a return
- Unpredictable Postal delays (not counting organised strikes, bank holidays etc.)
They also give the following example of what they see as unreasonable excuses:
- You relied on someone else to send your return
- Your payment failed
- You found the online return system too difficult to use
- You didn't get a reminder from HMRC
Appealing to the Tribunal
If HMRC reject your application, you should consider taking it to a tribunal. In some circumstances they may take a wider view as to what is a reasonable excuse. For example, if you relied on your accountant, they may deem that it was reasonable to expect an enlisted, qualified professional to act on your behalf. In this example your case will be strengthened if you have used an accountant to file previous returns, but not if your accountant has previously been unreliable.