£100 tax return fine brings in £87m for HMRC

A little over 870,000 tax payers have failed to submit their self-assessment tax returns by the 31 January deadline, netting the treasury £87m.

A late tax return is penalised with an immediate £100 fine, which is subject to further hikes if the return continues to go uncompleted.

The tax authority has also revealed that almost 90 per cent of all returns (£9.24m) were completed online. A total number of £10.39m (92 per cent of all returns expected) tax returns were completed before the deadline.

The treasury will be encouraged by the increased take up of online tax returns, as the George Osborne set HMRC the target of giving every individual and small business a digital tax account by the end of the decade, in his autumn statement on 25 Number 2015.

Ruth Owen, director general for personal tax, believes HMRC is well on its way to becoming the digital tax authority the chancellor has set his sights on creating.

'Each year we're dedicated to making the self-assessment process easier and more intuitive. Our biggest innovation this year was the launch of the online personal tax account, with more than 825,000 customers accessing it as they completed their tax returns.

'Our new online tools proved just as popular with more than 328,967 customers taking part in webchats in the last two weeks of January, ensuring they were able to submit before the 31 January deadline'.

The treasury has chosen to pursue a digital tax platform as it will allow it to collect tax for more speedily and improve tax collection figures. The digital platform will also be depended upon to justify the chancellor's decision to make capital gains tax on the sale of a residential property payable within 30 days of sale in 2019.

HMRC's increasing use of digital tools also allowed it to intercept 17,000 fraudulent or incorrect repayments, worth more than £96m, the treasury said.

Richard Morley, a partner at BDO, said: 'While there has been a slight decrease on the number of individuals missing the online deadline, this figure highlights that many are still failing to organise their tax affairs. Individuals could appeal the penalty by giving HMRC what is deemed a ‘reasonable excuse’.

'However, the definition of a reasonable excuse is subjective and is being more frequently tested in many cases that reach Tribunal. Unsurprisingly, HMRC will not accept excuses such as “my internet crashed” or “I’ve been too busy”.'

Binyamin Ali is editor of Private Client Adviser