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<p>HMRC issues Self Assessment (SA) tax returns to customers when the information
they hold suggests that the customer meets the published criteria for completing one.
HMRC often cannot determine someone’s tax liability until they have sent in a tax
return, therefore they need the return to establish whether there is tax due or not.
Late filing and payment penalties are charged to encourage customers to file on time,
but HMRC can cancel a customer’s late filing penalty if the customer has a reasonable
excuse. Customers can also ask HMRC to remove them from the SA process for future
years if they no longer meet the criteria.</p><p> </p><p>From October 2011 the penalty
legislation changed, from this point the capping of penalties was no longer factored
into the calculation and any fixed penalty applied remained at the full amount regardless
of liability. Although no change to the current penalty regime has been announced,
Penalty Reform within Making Tax Digital will change the way HMRC calculates penalties
for late Submission and late payment of tax. The new legislation will factor in the
Liability amount, Filing frequency and length of time outstanding within its penalty
calculations.</p><p> </p><p>In reforming late payment and late filing penalties HMRC’s
aim is to encourage those who persistently default to comply with their tax obligations
rather than penalise those who make occasional errors.</p><p> </p>
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