Lots of publicity last week for HMRC issuing penalty notices for a minimum of £1,200 to 500,000 taxpayers. This is not much more than half the number that filed late last year, and the fall is perhaps not surprising given the much more penal penalty regime that now applies.

The old system was that £100 late filing penalty was levied for failing to file by deadline day (this still happens) and another such penalty for failing to file by 31 July following that date. There were also 5% surcharges on unpaid tax, levied on tax unpaid 28 days after deadline day and 6 months thereafter.

The new system involves a daily £10 penalty applicable from the beginning of May to the end of July (maximum £900) and a 5% penalty on tax unpaid by 31 July (or £300 if greater). And so far it  seems to be having the desired effect; as HMRC say, they want the returns, not the penalties.

It is possible to establish a reasonable excuse for late filing, but it needs to be compelling and apply to the whole period for which the return was not filed.

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