HMRC penalty regime review

Source: HM Revenue & Customs | | 21/05/2015

Earlier this year, HMRC published a consultation that examined various options for strengthening the effectiveness of its penalties' regime. The consultation looked at adopting a more personalised approach for dealing with penalties as well as looking to harness technological developments to boost taxpayer compliance.

The consultation was open for comment until 11 May 2015. The Chartered Institute of Taxation (CIOT) has published their response to HMRC’s consultation. The CIOT’s view is that HMRC is right to start at a high level with this consultation document by asking fundamental questions about how the penalty regime should work before exploring specific proposals. The CIOT broadly agrees that HMRC should use its increasing digital resources to promote compliance, by adopting a more personalised approach (with proper use of mitigation and suspension).

The principle of a single penalty system that covered all taxes was also welcomed. This would fit well with the development of HMRC’s single tax account covering all taxes. The CIOT also stressed the importance of simplifying the tax system so that taxpayers can better understand their obligations and how to comply with them.

Many of the current penalties are disproportionately expensive for those with lower earnings. For example, a £100 penalty for late filing of a Self Assessment return is of no real consequence to someone earning £150,000 per year but a significant amount to someone earning £15,000 per year.

 

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