T33 - Another fine mess

If the Taxman sends you a late filing penalty notice when you know you were well in time, what can you do about it?

What penalty? If you file a tax return late the Taxman has the right to hit you with a £100 penalty. By late, he means not having filed your 2002/03 self-assessment personal tax return by January 31, 2004. The first time you would hear of such a penalty being imposed is when he sends you an official notice of it. If it still hasn’t been filed by July 31, 2004 he can send out another penalty notice with another £100 added on. But you didn’t file your return late, or did you?

Taxman’s error. The Taxman had to admit recently that he has sent out £100 fines to an undisclosed number of taxpayers even though they had filed their 2002/03 returns by the January 31 deadline. Our sources have estimated that of the 950,000 penalty notices automatically sent out after the deadline by the Taxman’s computer, between 250,000 and 500,000 of these may have been sent in error!

Only an apology. The Taxman has been forced to publicly (via his web- site!) apologise “unreservedly” to anyone who has been wrongly sent a penalty notice for £100. The matter came to light after some taxpayers and advisers queried penalty notices. Where a fine has been issued in error, the Taxman says he will cancel it and also consider claims for compensation, i.e. costs that have been incurred as a result of his mistake or unreasonable delay.

Take action. Experience has shown that the Taxman will not automatically cancel penalties that are wrongly sent out. Even on cancellation where a fine has already been paid, he tends to keep the proceeds, unless formally asked to repay them.

Tip 1. If you have been sent a penalty notice in error write to your tax office to secure cancellation of the fine (and formally ask for a refund if it’s already been paid).

Tip 2. Compensation claims work best if you have incurred some costs. In the case of your adviser’s fees, they would need to actually bill you before this could be added to your claim.

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This web-site was last updated on 13/06/2008

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