HM Revenue and Customs (HMRC) are reviewing the penalties for those who fail to submit their income tax returns on time.
The immediate £100 penalty could be replaced with a system of penalty points so that financial sanctions apply only to those who persistently fail to pay their bills.
HMRC has acknowledged that the system is unfair on people who submit their tax return just 24 hours after the deadline, and pay the same penalty as those who miss the deadline by up to three months, after which there are more significant penalties.
Previously taxpayers who do not owe money have been fined. However the change in rules would allow a more lenient approach for those who had sufficient grounds for a waiver of the penalty.
The new system should better differentiate between deliberate and persistent non-compliers and those who make occasional errors. HMRC proposes reforming the rules along similar lines to driving penalties, where repeat offenders are given harsher penalties, while those who make an occasional mistake.
The radical plans are open for public consultation until May and could see people who owe the government tax charged with higher interest rates on their debts to encourage them to pay sooner.
For further information, please contact Rebecca Potton.