UNDER a new system, taxpayers who have not filed self-assessment returns within six months of the filing date will face a minimum penalty of £1,300 – even if they do not owe the taxman a penny or he actually owes them money.

“For the minority who file late, HMRC wastes more than £300,000 every year pursuing these late returns and getting involved in unnecessary appeals work,” a spokesman for the Revenue said.

“The current system does not encourage taxpayers to submit returns on time. The new penalty structure, with penalties increasing over time, provides a stronger incentive to submit the return and pay on time.”

The new late-filing penalty regime for 2010/11 returns will be:

When any return is late, an initial £100 fixed penalty arises the day after the filing date. This applies even if there is no tax to pay or the tax due has been paid on time.

Individuals are notified they will be liable for a further daily penalty if the return is not submitted within three months of the filing date. The penalty is calculated at £10 per day, until the return is filed, for a maximum of 90 days (up to £900).

After the daily penalties, and if the return is still outstanding six months after the filing date, a further penalty arises, calculated at five per cent of the tax liability on the return or £300 if this is higher.

Where the return is still outstanding after 12 months, a further penalty arises, calculated at five per cent of the tax liability on the return or £300 if this is higher.

If a determination has been made because the return has not been received, the penalties at six and 12 months will be based on the estimated amount in the determination, and then adjusted retrospectively when the self-assessed amount is returned.

To that are added penalties for late payment.

“These penalties will be issued automatically to all those [who file self-assessment returns] who do not file and pay on time. Taxpayers will be able to appeal against any penalty on the grounds that they have a reasonable excuse for not complying on time and all penalty notices will include an appeal form and details on how to appeal.”

INFORMATION: More at http://www.hmrc.gov.uk/about/penalties.htm