As tax specialists, we really do appreciate that HMRC has a difficult job to do. However, what politicians call the optics – that all important public perception the public has of you – are not looking particular good for the tax authorities at present. For a start, there is the ever-present problem of getting hold of them, often blamed on a post-pandemic WFH culture and well-documented in the national press. Then there is the suggestion that HMRC is trying to reduce its own workload at the taxpayer’s expense by raising the earnings threshold at which workers are required to file a tax return from £100,000 to £150,000. This change comes into effect next year and accountancy firms like ours believe it may well lead to more taxpayers paying incorrect amounts of tax, possibly then incurring further penalties.
In the last few days, another dreadful PR own-goal has been revealed, with the news that 184,000 people who earn so little that they do not pay tax have, nonetheless, been fined for their failure to complete a self-assessment tax return on time. An analysis, by the independent think tank Tax Policy Associates, found that in 2020-21 HMRC issued fines to 184,000 people whose annual income was less than £12,500 – in other words below the income tax threshold - for not submitting a self-assessment tax return by the deadline.
By definition, these people are low-earners, many experiencing financial hardship, who often misunderstand the initial fine and are subsequently sent further penalties, as result – landing them in thousands of pounds worth of debt.
Now it should be noted that these fines can be removed on appeal. That, however, does not negate the fact that, as trade journal Accountancy Daily reported, “In total, around 92,000 among the lowest-paid 10% of the UK population were handed hefty fines by HMRC for late filing in 2020-21. By comparison, just 39,000 of the highest-paid 10% received fines in the same year. Highlighting the seriousness of this, Dan Neidle, founder of the independent think-tank Tax Policy Associates, said: ‘Something’s gone badly wrong when 40% of HMRC’s late filing penalties are issued to people who earn too little to pay tax. The law needs to change.’” It most certainly has and most certainly does!
Vivian Linstrom M&S Accountancy and Taxation Ltd.