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Over a million taxpayers did not submit returns by January 31st last year

Taxpayers who do not owe tax, or are even due a tax rebate from HM Revenue & Customs (HMRC), will be fined for the first time this year if they do not complete tax returns by January 31st 2012, according to UHY Hacker Young, the national accountancy group.

Independent chartered accountants Campbell Dallas, the only Scottish member of UHY Hacker Young, says that HMRC sends out thousands of tax returns every year to taxpayers who do not owe tax. In previous years, taxpayers who did not owe tax were not fined if they did not submit a completed tax return on time.

HMRC has issued around 10 million self-assessment returns this year. Last year, approximately 1.4 million tax returns were not completed by the January 31st deadline. Late filing penalties totalled £20.8 million in 2009/10, up from £19.1 million the previous year. According to some estimates, the take for 2010/11 could reach £90 million.

Campbell Dallas says that a very significant percentage of those returns would not have been completed last year because taxpayers did not owe any tax. If the same number of taxpayers fail to complete tax returns this year, HMRC could collect millions of pounds in additional fines.

Aileen Scott, tax partner at Campbell Dallas, comments: “A lot of taxpayers will be wrong footed by this. Fining someone who doesn’t owe tax or is due a rebate seems very heavy-handed. Considering how many errors have been made by HMRC in recent years, this will lead to a lot of bad feeling.”

“HMRC itself doesn’t even know how many taxpayers who fail to complete returns do not owe tax. Even if it’s a relatively small minority, we are still looking at millions of pounds in fines.”

She adds: “Fining taxpayers who are owed money by HMRC seems even more unjust. Ironically, these taxpayers will be doing HMRC a favour by not completing a tax return and asking for a rebate – yet they can now expect to be fined for their generosity!”

Campbell Dallas says that a lot of taxpayers will not realise that the new fines have come into force, so are likely to be caught out. Aileen Scott says: “HMRC has not done enough to publicise the new fines. A lot of taxpayers will be incredulous when they receive one. Many taxpayers will know instantly that they do not owe tax, so they will quite reasonably assume they have nothing to declare.”

In previous years, the £100 penalty late-filing penalty would stand for six months, after which another £100 would be added. From January 31st 2012, three months after the initial penalty, a £10 daily charge will be added, up to a 90-day maximum of £900, with further penalties after that.

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