According to an internal memo picked up by The Daily Telegraph, HMRC’s £100 fine for people who missed the tax return deadline on 31 January is frequently being waived.
Tax officials were asked to dismiss the charge without further investigation if someone provided a “reasonable” excuse after paying their tax bill.
According to HMRC’s website, a reasonable excuse means: “something unexpected or outside your control that stopped you meeting a tax obligation.”
Included under this description are, amongst others, unexpected hospital visits, death of a partner, computer failures and postal delays.
A reported 890,000 people missed the deadline, and even those who were just a day late were charged the full penalty amount. A £10-a-day penalty was applied to those who took longer to complete their return. This was capped at £900 with added interest on the outstanding amount.
HMRC has decided to waive the late return penalty after facing a backlog of almost a million letters from taxpayers.
The memo also notes that the time saved will allow HMRC employees to focus on more high priority debt collection, such as major tax avoidance, instead of imposing a penalty on people who are trying to successfully complete their tax return.
HMRC has admitted that its system for imposing penalties may be too rigid and is considering dropping the fine altogether for those who miss the deadline by a day or two. Another possibility is that a penalty points system, similar to the one used for motoring offences, will be set up.