HMRC has taken a lot of stick for its late filing penalties recently – and rightly so. The fines, which can easily run into the thousands of pounds for small businesses (even if they do not owe any tax) are completely out of step with those levied at companies orders of magnitude larger – and seem even more punitive when compared with the sweetheart deals HMRC has struck with Vodafone and Goldman Sachs, among others.
On Tuesday we reported on a tax tribunal ruling which had deemed HMRC’s late filing penalties “illegal”, and judged that they amounted to little more that a “cash-generating scheme” for the Treasury. The decision hinged upon the fact that HMRC waited several months before informing firms they had missed their filing deadlines, by which time they had accrued several hundred pounds worth of fines at the minimum.
HMRC defended itself by saying it’s sole duty was to collect tax, not to act as a reminder service. However, a quick glance at HMRC’s website seems to debunk this defence pretty swiftly. HMRC offer a quarterly VAT reminder for those who pay their VAT online and email reminders to those on the Construction Industry Scheme. HMRC also offer almost-daily reminders of upcoming deadlines on their Twitter feed (for example, here, here and here).
Through Business Link HMRC and Companies House also offer email reminders for Corporation Tax, Annual Returns, PAYE and NICs. So the notion that HMRC is not in the business of operating email reminder services seems to be largely incorrect.
So was HMRC engaging in a deliberately malicious scheme to bolster its own coffers? Unlikely. The worrying aspect of HMRC’s defence is that it shows the taxman’s left hand doesn’t know what the right is up to. As our resident accountant Steve Crouch put it on Monday, ”there’s a lack of leadership that’s really worrying.”
HMRC apologised last year for its poor performance after being blasted in a report from the Treasury Select Committee. The report found that in May 2010 HMRC answered only around 41% of phone calls, and postal replies taking between two and three months were “not uncommon”.
With Department of Transport permanent secretary Lin Homer taking over as CEO of HMRC this month, and permanent tax secretary Dave Hartnett set to retire in the summer (partially as a result of the controversial tax deals struck with large corporates), we can only hope HMRC find some much-needed leadership to not only improve service for the millions of freelancers, contractors and small businesses who rely on their services, but to make sure their penalty system is fair and consistent.
