HMRC issues almost £100m in tax return penalties

HMRC has issued 890,000 people with a £100 penalty fine for failing to complete their tax returns by the 31 January deadline.

The penalty has raised £89m and represents a 20 per cent increase from 2014, where £71m in late returns penalties were issued.

Returns filed a day late incur a £100 penalty even if there is no tax due.

Dawn Register, a partner specialising in tax dispute resolution at accountancy network BDO, commented: 'Under HMRC's penalty system, returns filed a day late incur a fee of £100, even if there is no tax due. If the return is more than three months late, then HMRC will begin to charge £10 per day.

'Leave it more than six months and you will owe an additional penalty of £300 or five per cent of the tax liability shown on the return, whichever is greater.'

She continued: 'The increase in the number of individuals missing the online deadline highlights that many are still failing to organise their tax affairs.'

Where an individual has a valid reason for not submitting their return on time, it is possible to contest the penalty by submitting an appeal and providing a 'reasonable excuse'.

Dawn Register explained: 'The definition of a reasonable excuse is subjective and is being more frequently tested in many cases that reach tribunal. Unsurprisingly, HMRC will not accept excuses such as "my internet crashed" or "I've been too busy". For anyone still due to submit their return, time is of the essence.

'We recommend they gather all the information they need, put some time aside and fill in the form as soon as possible to avoid any further unnecessary penalties. There is also now the risk that HMRC will send them an estimated tax bill and pass it over to their debt collectors. The situation can become very serious, very quickly.'

Binyamin Ali is assistant editor of Private Client Adviser