HMRC announced in June that Extra Statuory Concession B46 (ESC B46) allowing a seven-day grace period for late employers’ and contractors’ returns will cease from 31 March 2011.

ESC B46 established the principle that penalties would not be charged when employers and contractors submitting tax returns and CIS forms had taken “all reasonable steps” to file their returns on time, but were not able to do so due to unforeseen circumstances such as postal delays.

With the advent of online filing, which is required for P35s and P14s and will become mandatory for Corporation Tax returns from 1 April, HMRC considers the concession to be “redundant” because the delays it was intended to address will no longer happen. Returns must therefore reach the department by their due date or incur a late filing penalty of £100.

Confirming the new penalty regime HMRC explained: “Any customers filing a return late will, as now, be able to request us to remove any penalty, if they believe they had a reasonable excuse for the delay in filing. We will consider every case on its own merits. Customers can also appeal against the penalty to a Tribunal.”

The Budget announced a welcome break for new businesses outside the South East, that of a National Insurance Holiday giving new companies the chance to take on employees, the first 10 of which will not have employers NIC due for the first 12 months, giving a potential saving of £50,000 BUT and it is a big but for new businesses. The Budget statements have been released and alluded to the fact that new businesses from 22 June 2010 would potentially qualify but the scheme itself was unlikely to be ready until September – so immediate confusion caused – qualifying companies from 22 June but scheme not ready until September so many new businesses are thinking that the NIC holiday will apply to them if they set up business after 22 June – yes and no – not all companies will qualify (exclusions on fishing, agriculture and mining already mentioned) but the NIC holiday CAN’T start until the scheme officially starts, so even if you set up a company (and are trading) in the period 22 June to official scheme start up you CAN’T apply the NIC holiday, you need to operate the “normal” NIC rules and this may catch out a lot of new businesses. The NIC holiday will start when the scheme officially starts whether it be September of another future date. It is important that companies do not fall foul of this rule as penalties are drachonian. If you are in any doubt contact the employment tax expert

It has now been a year since HMRC introduced the internal review system which was intended to be a bridge between the case worker and the First Tier Tribunal in cases such as tax investigations, employment status cases and HMRC penalties to name but a few areas. Initially viewed with suspicion, and still to a certain extent, HMRC have published figures on the process to date.

Unrepresented tax payers have been relatively enthusiastic to use the system, probably on the basis of what have they got to lose – this made up 81% of those using the system. There are however strong distinctions to be drawn between automatic penalty cases where approximately half were cancelled compared with those that are far more substantiative. Even the latter category showed that about 25% were either cancelled or varied – so there is a definite moral here – don’t reject the internal review system out of hand it can be a useful process if dealt with correctly you just need to make sure the person dealing with your case understands the process. So, if you need advice call us today on 0800 917 9176

HMRC have recently published details of their internal review of tax enquiries, employer compliance reviews, tax investigations etc in relation to cases that have occurred since 1 April 2009 which does make for interesting reading:

“Outcomes excluding penalty cases 3,443 cases out of 18,526

Upheld: review complete – 2,603 (76 per cent)
Deemed Upheld: time limit expired – 20 (1 per cent)
Varied – 349 (10 per cent)
HMRC decision cancelled – 471 (14 per cent)

Outcomes penalty cases 15,083 cases out of 18,526

Upheld: review complete – 6,281 (42 per cent)
Deemed upheld: time limit expired – 48 (0 per cent)
Varied – 793 (5 per cent)
HMRC notice cancelled – 7,961 (53 per cent)”

In basic english this means that 24% of non penalty cases were varied or cancelled and a staggering 58% of penalty cases were varied or cancelled

The results clearly show that it is in your interest whether you are an individual or a company (where there is reason to doubt HMRC’s assessment) to complain. We would also add that it is advisable to obtain specialist help when HMRC comes a calling, it’s not a time to dabble so give us a call on 0800 917 9176