Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether self-employed individuals who file their tax returns late but owe no tax are penalised.

HMRC issues 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 we can cancel a customer’s late filing penalty if they have 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.​

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 we calculate 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.

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.