Tax experts optimistic about penalty review

Suspended penalties to encourage complying in the long-term; what happens if you file late ‘because life got in the way’ and escaping a fine if you go on a course.

These are just three of the considerations made in a now-closed consultation which accounting experts are welcoming for being refreshingly “wide-ranging.”

The Association of Taxation Technicians adds: “There is a real chance to develop an overall approach to penalties that is coherent, practical, cost-effective and capable of delivering greater compliance.”

According to the association, there is some evidence that suspension of penalties is not considered by HM Revenue & Customs where it should be, even though doing so may incentivise taxpayers to comply in the future.

If the tax department believes what is stated in its consultation – that the aim is “compliance not penalties,” then the ATT believes that using the suspension model more would make sense.

Also among its more than 20 recommendations is the idea of bringing VAT default surcharges into line with other late payment regimes, and one to explore the merits of ‘tax awareness’ courses in place of monetary penalties.

Tax officials engaging with a late-filing customer before penalising them, where that customer has historically filed on time and not broken other HMRC rules, is another recommendation.

As a senior Revenue officer apparently recognised at a recent workshop, ‘life just getting in the way’ for such a customer is more likely to have caused their non-compliance than them ‘joining the dark side.’

The association reflected: “In these circumstances, the most appropriate initial response from HMRC should be more interaction with the customer to ascertain why the compliance pattern has changed adversely”.

“A suitable action to rectify matters” should then be initiated, the ATT said, “rather than a presumption that a penalty should be imposed.”

The consultation, which the taxman is now analysing feedback to, made headlines earlier this year for implying that the £100 automatic penalty for self-assessing just a single day late should be scrapped.