Receiving an HMRC penalty can be stressful, but it doesn’t always mean that you have to accept it. HMRC always allows you to appeal a penalty if they think there is an error or you had a genuine reason to miss the deadline for paying tax. Although getting a penalty letter can be worrying, whether it is a late self-assessment tax return or delayed payment, the key is to act promptly. HMRC expects appeals to be submitted within 30 days, provided the excuse is genuine for an appeal. By understanding the appeal process and avoiding the common mistakes, there are chances of a successful outcome.
Here we will explain how HMRC penalties can be appealed, what the grounds HMRC is likely to consider are, and what are the other options available is appeal is unsuccessful.
Types Of HMRC Penalties That Can Be Appealed
If you have a valid reason for why you failed to meet obligations, or there is any error or incorrectness, you have the right to appeal. HMRC penalties aren’t final. Some common HMRC penalties that can be challenged are:
Late Self-Assessment Tax Return Penalty
If the deadline for the self-assessment tax return is missed, then you will receive an initial penalty of £100. If the return remains outstanding:
- There will be an additional daily penalty of £10 per day after 3 months, which can add up to £900.
- Penalty of 5% of tax or £300, after 6 months, whichever is greater.
- Twelve-month penalty of 5% or £300, whichever is greater.
If you had genuine or exceptional circumstances that led to missing the deadline, you can appeal the penalty.
Late Tax Payment Penalty
The penalties for late tax payment can depend on the overdue time for tax payment and the type of tax. This can result in penalties and interest charges.
If you pay tax late, you can get penalties at a month, 6 months, and 12 months:
- Penalty of 5% of the unpaid tax.
HMRC may reduce or cancel the penalty if the circumstances for missing your deadline were beyond your control.
Inaccurate Tax Return Penalties
HMRC issues a penalty letter if there was an inaccuracy in the tax payment that led to underpayment of the tax. You can appeal the penalty if you provide enough evidence that the mistake was genuine and not deliberate or because of carelessness.
Inadequate Required Records
HMRC can issue a penalty when the required records are not complete or available when requested from individuals or businesses. However, if you have exceptional circumstances because of which the records were destroyed, you can appeal the penalty with supporting evidence.
Can Every HMRC Penalty Be Appealed?
An HMRC penalty should be appealed within 30 days of the penalty being issued, but not every penalty appeal needs to be successful. The successful status of the appealed penalty depends upon various factors like:
- Your excuse needed to be counted as reasonable.
- There was an administrative error.
- Had exceptional circumstances.
Excuses that can be counted as reasonable:
- Serious illness.
- System failure during online return.
- Postal delays.
- Theft of records.
- Natural hazard led to loss of records.
Excuses that can’t be counted as reasonable:
- Lack of funds.
- Forgot the deadline.
- Didn’t get the reminder.
- Waiting for last-minute tax submission.
- Found it difficult to use the HMRC system.
Procedure To Appeal An HMRC Penalty
Step 1: Check The Penalty Letter Thoroughly
Before you start to appeal the penalty, there are quick checks needed to be done like:
- Date of the issued penalty.
- The date you paid your tax.
- Type of penalty you received.
Step 2: Gather The Evidences
Once you have checked the details of the penalty, it is now crucial to gather the evidence you have for your excuses to show that your excuse is genuine. Evidence should include:
- Medical Certificates
- Insurance reports
- Screenshots or pictures of the technical issue.
Step 3: Submit Your Appeal
There are two options available to submit your appeal:
- Submit your appeal online.
- Download the SA370 or SA371 form to appeal by post.
Step 4: Wait for HMRC’s revert
After submitting the appeal, you need to wait for HMRC’s decision. The decision may include:
- The appeal is rejected.
- More information is needed for the appeal.
- The appeal is accepted successfully.
What Are The Options Available If The Appeal Is Cancelled?
If your appeal is cancelled and you still believe that the penalty issued was unfair and HMRC didn’t consider your circumstances properly, then you still have the following options available:
Ask for an Internal Review
When your appeal is rejected, you can ask for an internal review within 30 days of the penalty received. During an internal review, an HMRC officer is appointed who wasn’t involved in the original decision to check the circumstances, so that a fresh and impartial assessment of your case can be started.
After reconsideration of all the information, HMRC will decide whether to uphold the original decision, change it, or cancel it.
Appeal to tax tribunal
If you are still dissatisfied with the internal review of HMRC, you can appeal for First-tier Tax Tribunal. It will analyse the evidence of both parties, and an impartial decision will be taken according to the Tax Laws.
Is It Necessary To Pay A Penalty While Appealing?
The penalty issued to you by HMRC should be paid on time even if you are going to appeal because if your appeal is unsuccessful, the interest rate on the unpaid penalty will keep on adding.
In case your appeal is successful, you will get a refund of your penalty from HMRC.
Mistakes to be avoided while appealing
- Ignoring the HMRC’s penalty notice.
- Missing the deadline of 30 days.
- Thinking that the penalty will be automatically cancelled.
- Not giving reasonable excuses with evidence.
- Not filling the overdue returns for months.
How Can You Take Advice From Professionals?
Professional tax advice can help you avoid further complexities. Lexarox Accounts provides you with qualified and experienced accountants who handle the penalty issues on behalf of individuals and businesses across the UK. They are completely registered as HMRC-authorized agents. They deal with situations such as:
- Multiple penalties from HMRC.
- Complex tax matters in business.
- VAT and corporation tax penalties.
- Represents you throughout the appeal process.
- Deals with the repeated compliance issues you are facing.
- Helps you during the tribunal appeals.
- Helps you to find the mistakes and errors that caused the penalty.
- Advises you on how to avoid future penalties with timely tax returns and payments.
Conclusion
Getting an HMRC penalty can be frustrating, but it should not be treated or accepted as the final decision. If you are not satisfied with the HMRC’s decision, and believe that there is an error or you have a genuine reason for missing the deadline, then you can always appeal the penalty.
If your appeal is rejected or is unsuccessful and you are still dissatisfied, you can further move to the tribunal for redressal. The key is to act patiently and avoid delays.
Lexarox Accounts assists individuals, sole traders, and businesses with penalty payments, HMRC compliance, and tax-related matters. There is no better partner than Lexarox, which can help with efficient penalty handling and HMRC compliance.
Lexarox Accounts
Contact Details: 0792 883 0368 | 0747 235 6282
Telephone number: 0208 533 1358
Email: info@lexaroxaccounts.co.uk
Address: Lexarox Accounts MS.128, 203-213 Mare Street, Hackney, London, E8 3JS
FAQs
Why do I receive an HMRC penalty?
The reasons for receiving an HMRC penalty are different, such as overdue tax payment, insufficient data, error in your data available online for HMRC.
Should I pay the penalty while waiting for an appeal?
Yes. The penalty should be paid while waiting for an appeal because is your appeal is unsuccessful, then the interest will keep adding on, and if the appeal is accepted, then you will get a refund.
What evidence should I provide while appealing an HMRC penalty?
The evidence should include medical certificates, insurance records, proof of a technical issue, and travel disruptions.
What are the chances of an HMRC penalty appeal being successful?
The chances completely depend upon the evidence supporting your appeal and the reasonableness of the excuses.
Can HMRC reduce the penalty instead of cancelling it?
Yes. In many cases, HMRC may reduce the penalty, rather than completely cancelling it, by accepting part of your explanation.
Can I submit an HMRC appeal online?
For many penalties, HMRC provides an online service to appeal through your tax account. If the online option is unavailable, you can appeal by post.
Why should I seek professional help with an HMRC penalty appeal?
If the situation is complex, the Lexarox Accounts professionals can help you to check if you have valid grounds for appeal or not and also help you with gathering the evidence and will represent you throughout the appeal process.
