How hard is online filing and is HMRC sympathetic if you get it wrong?

28 September 2022

With the introduction of making tax digital for income tax approaching fast, many people will need to tackle HMRC’s online systems up to five times more regularly. Mistakes will inevitably be made. We like to think that innocent errors will be understood but a recent tax case suggests this may not be the case.

In September 2020 a taxpayer decided to electronically file her tax return for the first time. She fed in the information and checked her computation. Unfortunately, she did not realise she needed to click again to confirm filing. She later paid the tax calculated on time.

When she later received an HMRC statement showing a credit balance and an unallocated payment the taxpayer did not understand what this meant. When she logged into her tax account it said “You paid the right amount of tax. There is nothing more to pay this year.” Understandably she assumed everything was fine.

She subsequently received a £100 late filing penalty which she appealed, and HMRC took four and a half months to advise her that her online return had not been filed. Their explanation of what had gone wrong was less than helpful. Meanwhile a further £1,200 of fines accrued.

Faced by the above you would hope HMRC would accept this was an innocent error and waive any automatic penalties. Instead, they argued that she should have noticed a message on the screen saying the computation was estimated, and also checked with HMRC that they had safely received her return. The Tribunal did not agree with this view and waived all the fines.

It might reasonably be questioned whether it is a worthwhile use of time and costs pursuing taxpayers in the courts over a failure to click on one button, particularly when all tax was paid.

In a report in 2020, HMRC found that 22% of UK adults would need some support to interact with government online to complete some tasks, and 8% of UK adults did not use the internet at all. There has been a lot of talk about support for these taxpayers. That this case had to go to Tribunal suggests that in fact the digitally challenged may find little sympathy if they fail to correctly interpret complex HMRC systems.

Increasing use of digital technology can be a huge boon to taxpayers and the Revenue, but HMRC’s focus should be on helping and educating the public, not penalising innocent errors made by those struggling to adapt to new systems and technology.