Civil penalties require upgrade, says OTS

HMRC’s civil penalty system is working in line with its objectives but cannot be shown to be encouraging positive behavioural change in taxpayers, according to the Office of Tax Simplification (OTS).

The announcement follows a short research project by the office that focused on inconsistencies in the application of the fines and found them to be appropriate for the increasingly digitised nature of the tax system.

The OTS is calling for a detailed government review and offers 14 recommendations for immediate improvement, including removing recipients of overseas pensions from self assessment if their income is consistently below the tax threshold, they are over retirement age and can confirm their circumstances will not change.

Late-filing penalties are often charged when online returns are completed, payment made and a submission number generated without the form being filed, the OTS research found. The office suggests that an on-screen message from HMRC warn taxpayers that their return has not been file which could lead to a financial sanction.

The Revenue is also advised to train its contact centre staff on late-filing penalties and add information to the scripts used in discussions with taxpayers, who are frequently unable to receive answers about the fines.

Zero returns for two or more consecutive years ought to generate an automated letter asking if the taxpayer still needs to be on the self assessment (SA) register, and SA reminders should emphasise late-filing fines as well as explain what to do if the taxpayer believes he or she is no longer required to submit a return, according to the OTS.

Issue: 4479 / Categories: News , penalties , Admin , Compliance , Online , Self assessment