100,000 taxpayers fined by HMRC for inaccurate tax returns

Volume of fines paints stark picture of non-compliance, in timely warning to the self-employed.

In the 2021/22 tax year, over 100,000 workers were issued with fines by HMRC, according to a Freedom of Information (FOI) request lodged by RSM, an audit, tax and consultancy firm.

In total, the tax office issued 101,045 financial penalties in the tax year until March 2022, though almost three-quarters of them (70,856) were suspended for two years.

According to RSM, HMRC will be stepping up its post-pandemic compliance activity, which was softened due to the general disruption businesses faced.

Though compliance activity is business-as-usual for HMRC, the news follows recent research which found that one in six self-employed workers are unable to pay their tax bills. It will also serve as a timely reminder for the UK’s self-employed workers that the Self-Assessment tax deadline is looming.

Breaking down the numbers

There are different types of penalties issued by the tax office, including for late submission or payment, or for errors on returns, paperwork or payment. Where errors are made, there are three levels of severity; a lack of reasonable care, deliberate, or deliberate and concealed. 

According to RSM, most of the penalties were issued for a failure to take reasonable care:

• 101,045 fines issued to 29,568 taxpayers
• 89,317 penalties were issued for a failure to take reasonable care, with 70,856 suspended
• 11,728 penalties were issued for deliberate conduct

The suspended fines are subject to the recipients meeting conditions for up to two years. These conditions are broadly aimed at removing inaccuracies arising from a lack of reasonable care, but the fines may be upheld if the taxpayer doesn’t meet the conditions.

Reasonable care and ensuring compliance

The ultimate responsibility lies with the individual to ensure that the information provided to HMRC is accurate. The tax office expects that reasonable care is taken at all times with the Self Assessment, including appropriate record-keeping.

In the event that you are made aware of any errors or inaccuracies in your tax return, you should inform HMRC at the earliest opportunity.

With fines ranging from 15-30% of the tax bill for failure to take reasonable care – all the way up to 50-100% for deliberate and concealed inaccuracies – it’s important to take compliance seriously.

The importance of accuracy on your tax return

While HMRC suspended the majority of fines issued, the numbers highlight the importance of getting your tax return right and submitting “accurate information, on time”, according to online accountancy firm QAccounting.

“We’re all human, and everyone makes mistakes sometimes – but the Self Assessment is one thing you don’t want to get wrong. 

“It’s important to provide HMRC with accurate information, on time. These figures show that the tax office is taking non-compliance seriously, and against a tough economic backdrop, a fine from HMRC could be devastating.

“But the Self Assessment isn’t straightforward, especially if you’re new to these ways of working. If you’re not confident submitting the tax return yourself, you’ll want to find an accountancy that you trust to manage your tax affairs.”