LONDON: HMRC came up with £100 fines for failing to complete their income tax returns on time, under radical government plans.
HM Revenue & Customs has admitted that its penalties regime may be too rigid, and is drawing up proposals to end fines for taxpayers who miss the deadline “by a day or two”.
New rules outlined for public consultation could see people who owe the government tax charged higher interest rates on their debts to encourage them to pay sooner, instead of being hit with automatic fines.
A system of penalty points – similar to motoring offences – could also be introduced so that financial sanctions apply only to people who persistently fail to pay their tax bills.
The plan, which will be open for public comments until May, comes after figures showed 890,000 people missed the January 31 deadline for completing their income tax self-assessments last week. They now face an escalating scale of penalties, starting with an automatic £100 fine.
More than one million more people were drawn into the time-consuming and complicated process of filling in self-assessment forms after the government made cuts to Child Benefit for higher rate taxpayers.
Since 2013, parents in the higher rate tax bracket who received child benefit were hit with a sliding scale of tax charges if they earned between £50,000 and £60,000 a year. Those on more than £60,000 lost all their child benefit.
In the first year of the reforms, 200,000 parents were estimated to have missed the deadline after being drawn into the self-assessment system because they received child benefit. Those who failed to complete their returns in time were fined.
However, HMRC has now conceded that the existing penalty rules mean “honest” taxpayers who make “the occasional error” are treated the same as “the dishonest minority who try to cheat the system”.
