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The value of HMRC tax penalties surged by 25 per cent between 2022 and 2023 to its the highest level on record, new data shows, as the government faces criticism for unfairly fining struggling businesses.
HMRC imposed £851m in penalties between November 2022 and October 2023, up from £681m in 2021/22, according to data obtained by accountancy firm UHY Hacker Young through a freedom of information request.
The value of tax penalties has risen consistently over the last three years.
Sean Glancy, a partner at Hacker Young, said these fines could be an “easy win” for the government as it chases tens of billions of pounds in outstanding tax debt.
The firm added that the increase in penalties put further pressure on individuals and businesses who are struggling to pay on time due to high interest rates and the threat of recession.
“HMRC continues to widen the net for tax penalties, so people who weren’t captured before are getting caught now,” Glancy said.
“These penalties are extremely unhelpful as individuals and businesses continue their post-pandemic recovery.”
The government last year introduced a penalty-based points system for all VAT returns that are submitted late, replacing a default surcharge.
Penalties were also extended to nil or repayment returns that are received late, which Hacker Young said made it easier to trigger fines through simple paperwork errors.
Glancy argued: “HMRC is often not reasonable in removing penalties for genuine errors – they sometimes seem to operate with a ‘shoot first, ask questions later’ approach. Once a penalty is issued, the process is quite draconian, however about half of penalties are withdrawn on appeal.”
The firm advised individuals and businesses to appeal fines, arguing that a “significant number” are withdrawn when challenged.
An HMRC spokesperson said: “We’re committed to helping customers pay the tax they owe, on time.
“We charge penalties to encourage customers to meet their obligations, while acting as a sanction for those who don’t.
“If customers are unable to pay on time, they can contact us to discuss their options.”