HMRC is 'illegally' fining small businesses, says tribunal

HM Revenue and Customs (HMRC) is "deliberately" waiting months to let small business owners know they have missed tax filing dates so it can generate millions in late payment fines. 

That's the finding of a recent damning judgment by a Tax Tribunal.

Under the government department's policies, companies which don't file their tax returns by the May deadline are not sent a computer-generated reminder until September meaning they are liable for for four months of late-payment fees at £100 each and another £100 penalty for late completion. 

But the Tribunal said the practice is "unfair".

"It is no function of the state to use the penalty system as a cash-generating scheme," said the judge, Geraint Jones, QC. "We have no doubt that any right-thinking member of society would consider that to be unfair and falling very far below the standard of fair dealing expected of an organ of the state."

HMRC has said it will appeal the decision but if it is upheld, up to 100,000 businesses could be entitled to refunds worth millions of pounds. 

The decision against HMRC follows several claims that the department is discriminating against small companies. 

Earlier this month, the House of Common's Public Accounts Committee slammed the Revenue over its plans to spot check the paperwork of 20,000 small businesses, despite letting large firms like Vodafone and Goldman Sachs not pay millions of pounds in tax.