Self assessment late filing penalties – improving fairness for unrepresented taxpayers

With the piecemeal introduction of a new ‘simpler and fairer’ penalty regime for self assessment, HMRC are on course to create a two-tier system which could disadvantage some taxpayer groups, including those on low incomes.

We call on HMRC to bring in the new regime for all taxpayers as soon as possible.

In the interim, we also set out a series of steps which could be taken to reduce the unfairness arising from the differences between the two regimes. These include:

• A more lenient approach towards first-time failures to file.
• Ensuring that GOV.UK guidance on the self assessment process is better aligned with taxpayers’ legal obligations.
• Before a return is submitted, making it clearer that a requirement to file a self assessment return can be withdrawn when a taxpayer does not meet HMRC’s self assessment criteria. Messaging should be reviewed and HMRC advisers trained to identify when this will apply.
• After a return is submitted, automatic cancellation of late filing penalties for taxpayers falling outside of the self assessment criteria.
• The use of simple assessment (rather than self assessment) to recover taxes that are owed through pay as you earn (PAYE).