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I'm in a difficult position with respect to HMRC.

My story: just before the deadline for submitting an income tax return for the tax year 2013-2014, this January (2015) I got a letter from HMRC telling me I had missed the filing date and was subject to a £100 penalty. I was puzzled and rang them. While I was speaking to them I noticed the return date for the problem return: 2011-2012.

It had taken HMRC two years to tell me about the missed return. On the phone they claimed it was because they did not have my address. They have been writing to me regularly at my home address since well before the end of the 2012 tax year and I have since made two successful, on time tax returns.

Ok, you say, so I have to make the return and pay the £100 fine, my bad, no? Well, no. Because the return was over a year late, I had accumulated additional penalties of £1,500, so the bill was £1,600. I didn't owe them a penny in tax for that year, in fact they owed me a small tax refund. I made the mistake because I used return filing software for the first time in 2012 and hadn't noticed that I had only made a test submission (which was fine), not the "live" submission. This seemed an absurd, Kafka-esque situation, and I was confident that my appeal against the penalties would succeed.

HMRC have now rejected my appeal, saying I did not have a valid excuse for not filing on time so the penalties would stand. So my question is simple: were HMRC required to tell me specifically about my late filing and the penalties accumulating, or is it acceptable for them to wait for a year after the maximum penalty has accumulated and only then tell me about it? I had no reason not to submit, and the return was still sitting there when I returned to the software; within minutes of notification I had successfully filed the return.

I intend to ask for a review of their decision and to appeal to a tribunal if that review is unfavourable to me, but I would like to know what folks think about the basis of my appeal, which is that I had a genuine belief that I had submitted the return and I should have been told about the additional penalties in good enough time to avoid incurring them in the first place.

[As an aside, HMRC have been told to crack down on tax avoidance because of the hoo-hah about huge corporations not paying any income tax. It is too hard to get money from such high-profile targets, so people like me who cannot afford to avoid a penny in tax are now in the firing line.]

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  • Aha. You can ask for a review, but I doubt if they will budge. But no harm in trying. On the phone they claimed it was because they did not have my address If you have letters from them proving it for the period get going. I was also in the same scenario, had forgotten to do so(for 3 years) but called them up when I realized I had to do it. And was let off with a penalty of around £600, because I did it voluntarily. If they had caught me, then I would have been screwed.
    – DumbCoder
    May 18, 2015 at 9:19
  • When you say "return filing software" do you mean 3rd party software or HMRC's own online tax return system? If the former, you could try taking it up with the provider of that software, they ought to have made it clearer that you hadn't filed the real return. If the latter, I think you are out of luck. IME it makes it very clear when you have or have not submitted your actual return. On HMRC's page about "Reasonable excuses" it specifically lists "you didn’t get a reminder from HMRC" as very unlikely to be accepted. I think you probably have to chalk it up as an expensive learning experience.
    – Vicky
    May 18, 2015 at 9:47
  • Another unreasonable excuse is that the software was too difficult to use, so any confusion between test and real submissions is struck out as well.
    – Andrew Leach
    May 19, 2015 at 11:51
  • Actually I'm not asking about excuses for not filing but whether, if you fail to file, HMRC have any duty to inform you about this or about accumulating penalties. Apparently my responders do not think so (and thanks), though to my way of thinking this is not reasonable behaviour.
    – fairflow
    May 20, 2015 at 12:00
  • @DumbCoder yes, I do have evidence, and that's interesting about your experience; they are suspending the daily penalties of £900 pending another appeal of general interest but that still leaves £700 to pay.
    – fairflow
    May 20, 2015 at 12:06

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I'm answering my own question because in some sense, I alone know the answer.

After the review, HMRC decided to waive all penalties (including the initial £100 penalty for late filing, which I had not appealed against) because "HMRC may not have informed me" about the mounting penalties.

I had pretty good evidence that they hadn't informed me as there was a software change and immediately after that I got an initial penalty notice followed a day or so later by the further penalty notice. But I am happy with the outcome, I wasn't going to argue any further!

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