LITRG explains how to challenge Self-Assessment late filing penalties

Taxpayers who have been fined for failing to file their Self-Assessment tax return on time may be able to have their penalties cancelled. 

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If a taxpayer cannot get the filing requirement withdrawn, they can appeal the penalty if they have a reasonable excuse, or there are special circumstances.⁶ 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