LITRG explains how to challenge Self-Assessment late filing penalties

The Low Incomes Tax Reform Group (LITRG) said that taxpayers who did not submit their 2021/22 Self-Assessment tax return online by 31 January 2023 may be able to get the automatic £100 late filing penalty cancelled. If a taxpayer does not meet HMRC’s criteria for Self Assessment¹ for a year, they can ask HMRC to withdraw the notice to file a Self-Assessment return for that year. If HMRC agree to withdraw the requirement, any late filing penalties for that return will be cancelled automatically. 

Taxpayers who feel this might apply are being urged to double-check their circumstances using the ‘Check if you need to send a Self-Assessment tax return’ tool on GOV.UK,² and if appropriate telephone HMRC to get the filing requirement removed.³ 

LITRG added that taxpayers must make this request before filing the return, as HMRC cannot withdraw a filing requirement after the tax return has been filed. 

Taxpayers who do not meet these criteria, but who have a reasonable excuse for not filing by the deadline or have special circumstances to report, may contact HMRC to appeal the penalty. 

According to HMRC, an estimated 600,000 customers missed the 31 January 2023 Self-Assessment deadline. ⁴ 

Victoria Todd, Head of LITRG, said: 

“HMRC automatically charge a £100 late filing penalty when a taxpayer misses their Self-Assessment deadline, regardless of their individual circumstances. However, the law contains safeguards that aim to prevent taxpayers from being penalised in circumstances where those penalties would be unfair. 

“If a taxpayer receives a late filing penalty, they should first consider whether they should have been required to file a Self-Assessment return in the first place. 

"If HMRC agree that a return is not required, then the penalties are cancelled automatically and the requirement to file a tax return for the year removed. 

“For example, a taxpayer may have registered for Self-Assessment in advance of starting self-employment but never commenced their trade. Alternatively, they may have earned less than £1,000 (gross) of trading income in the year, so may be able to get the filing requirement removed on the basis that the income is under the trading allowance.”⁵ 

If a taxpayer cannot get the filing requirement withdrawn, they can appeal the penalty if they have a reasonable excuse, or there are special circumstances.⁶ 

“HMRC define a ‘reasonable excuse’ as something that stopped a taxpayer from meeting a tax obligation which they took reasonable care to meet.⁷ 

“Any circumstances could potentially form the basis of a reasonable excuse, provided the taxpayer took reasonable care. HMRC provide some examples on GOV.UK, which include bereavement, serious illness and IT issues. The taxpayer must file their tax return without unreasonable delay after the excuse ends.” 

Victoria Todd continued: 

“Where the lateness can be explained by a reasonable excuse, or special circumstances, the onus is on the taxpayer to demonstrate this to HMRC so they can consider whether it is appropriate to cancel the penalties. 

“If HMRC do not agree to do so, taxpayers can ask for internal review of the decision and/or appeal to an independent tribunal to decide the matter.”⁸

Notes for editors 

1. See HMRC’s Self-Assessment criteria.
2. See Check if you need to send a Self-Assessment tax return tool.
3. See HMRC’s contact details.
4. See A record 11.7 million tax returns received on time (HMRC press release, 1 February 2023).
5. Even if a taxpayer’s trading income falls within the trading allowance for a year, it may still be advisable or necessary to file a tax return for the year. See HMRC’s manual at SAM100060.
6. If there is no reasonable excuse (or the return was not filed without unreasonable delay after the excuse ceased), then the law provides an additional safeguard for those who have ‘special circumstances’ which might justify a reduction in the penalty. HMRC say these should be uncommon and exceptional. In practice, however, taxpayers who qualify for such a reduction are likely to also have a reasonable excuse in any case. For more information on ‘special reduction’, see HMRC’s technical manual at CH170600ff and LITRG’s guidance.
   To make an appeal, the taxpayer should use form SA370 or the online service on GOV.UK.
7. See GOV.UK and LITRG’s guidance on reasonable excuse. Further examples can be found in HMRC’s Compliance Handbook.
   Insufficiency of funds or inability to pay is not, by itself, a reasonable excuse (or special circumstances) – but the underlying causes may be. For further detail, see CH160800. Taxpayers who do not have any grounds to get late filing penalties cancelled may be able to arrange a payment plan with HMRC, see our guidance at What if I cannot pay my tax bill?.
8. See LITRG’s guidance on tax appeals.