The consultation taking place into potential changes to the way penalties are applied to those who fail to complete their tax returns on time is complete. The review was welcomed by accounting experts who praised the breadth of the solutions which were considered and the results have lived up to their high hopes. Some of the suggested solutions to the problem of late payments included suspended penalties which could be used to encourage long-term compliance throughout future years and being able to avoid a fine by attending a course.
The Association of Tax Technicians is optimistic that the consultation which could help the department to develop a more cohesive and clear approach to the problem of compliance, as well as one that is practical, cost-effective and actually works to get taxpayers to complete the paperwork on time. The association believes that HM Revenue and Customs are failing to offer suspended penalties in cases where they perhaps should be considered, despite the potential for this to encourage taxpayers to complete their forms correctly for future years.
The consultation with the tax department revealed that their stated aim was for ‘compliance, not penalties’, which was at odds with their failure to use their powers to impose suspended penalties. The consultation came up with more than twenty different recommendations in order to make the system work more effectively, including the idea that VAT surcharges should be restructured in order to ensure that they are in line with late payments for other infractions. They have also been urged to consider the potentially galvanising effects of sending people on ‘tax awareness’ courses rather than imposing financial penalties.
One of the major things that the consultation was keen to encourage was increased engagement between tax officials and late filers, especially when that customer has filed on time in the past and has no other infractions to their name. The tax man is urged to recognise that most people who file their tax returns late are only guilty of allowing ‘life to get in the way’ as opposed to making a deliberate attempt to avoid filing altogether or to gain anything by filing late.
The ATT believe that, in such cases, HMRC should get in touch with the customer to ascertain what has caused a change in the way they interact with the system. They should then decide on an appropriate course of action to rectify the situation rather than automatically issuing penalties when they may not be the best way to tackle the issue. The consultation made headlines when it was embarked upon for suggesting that the £100 fine for filing late, even if it is just by a single day, would be scrapped altogether.
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