Umbrella company contractors have the peace of mind of knowing that their income tax is deducted at source. But contractors in the UK who file their own tax returns should be aware that HMRC continues to delay sending out penalty notices despite losing recent tribunal cases.
In the cases concerning Hok Limited and HMD Response International vs HMRC, the judge criticised the Revenue’s practice of issuing the penalty notices. It had applied penalties to 2009/2010 year end tax returns, bit the actual penalty notices were issued several months after the deadline and therefore the fines continued accruing.
At the time, Geraint Jones QC said, there was no logical reason why there should be a four-month delay in the issuance of penalty notices. A taxpayer who did not realise that he had erred would be faced with a minimum fine of £500.
However, it transpires that HMRC has not updated its systems and the penalty notices continue to be sent out late.
1.5 million people were hit by late filing penalties after this years January 31st deadline. McGrigors law firm obtained this data following a freedom of information request and responded to it by saying the Revenue’s automatic penalty regime has increased the number of late filing fines by 8%.
HMRC now hands out penalties to people even if they don’t owe any tax and this new regime has seen the amount of late filing penalties increase by 56% over the last five years. A spokesperson from McGrigors said HMRC was churning out fines and many people were being charged unfairly.
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