Published on The
Guardian online:
Hilary Osborne
Wednesday June 22, 2005
Taxpayers who file their
self-assessment forms late could face increased penalties
as the taxman attempts cut the amount of outstanding income
tax.
Last year £1.1bn in income tax was owed from 1.1m overdue
tax returns.
In a report on HM Revenue
and Customs, the department responsible for collecting tax,
the National Audit Office (NAO) said there had been a fall
in the number of people filing their returns late.
Just over 90% filed their
returns by the end of January 2004 and 2005. However, the
NAO said the department still had some way to go if it was
to hit its target of 93% by January 2008.
To reach its target, the
Revenue is focusing on the groups that have the worst track
record on filing their returns on time. These include young
males, those new to filing tax returns, those in the construction
industry scheme and taxpayers in some parts of London.
East London recorded the
largest number of late payers in the UK, with 24% of taxpayers
filing their returns after the deadline. At the other end
of the scale was Orkney, where just 5% missed the deadline.
The department is also
simplifying tax forms and guidance and reviewing the way it
penalises late filers. This, said the NAO, was "an opportunity
to improve the effectiveness of the penalty regime".
Currently, penalties are limited by law to £100 or the
amount of tax owed, whichever is lower.
In some countries, it said,
penalties for late filing are a percentage of the tax owed
or are based on the taxpayer's take-home pay, based on the
previous year's return until the late return is filed.
"The latter would
be particularly appropriate for wealthy late or non filers
to whom a £100 penalty may have no deterrent impact,"
the NAO suggested.
The department could also
make more of its power to apply daily penalties of up to £60.
The NAO said there were "significant numbers" of
people with two or more outstanding returns who have not yet
had daily penalties imposed.
Awareness of penalties
among taxpayers is low - research for the Revenue found that
only one-third of taxpayers knew they could face daily charges
for late filing.
The NAO's report also revealed
that many taxpayers could be paying the wrong amount of tax.
It said in the 2003/04 tax year just 71% of taxpayers were
given the right tax code while two million coding errors were
made.
It said improving on this
performance would be essential to the success of plans to
scrap self-assessment for one million people with very simple
financial affairs.
The head of the National
Audit Office, Sir John Bourn, said today: "The changes
being made by HM Revenue and Customs to simplify income tax
self-assessment returns should ease the burden for many taxpayers
in completing their returns and reduce costs for the department.
"It is essential that
these changes go hand in hand with more accurate processing
of people's tax affairs by the department. No less important
is that those who persistently fail to submit their tax returns
be brought to book."
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