27 April 2012 Last updated at 05:49 ET

Tax fine error hits 12,000 people, says HMRC

Millions of people have to fill in self-assessment tax forms every year

About 12,000 people who had been told that they no longer needed to fill in self-assessment tax forms have been sent penalty notices in error.

The letters, sent by HM Revenue and Customs (HMRC), came ahead of new £10 daily fines for non-filing which start on Tuesday.

Those affected were told that they no longer had to complete a self-assessment form, because their tax bill could be dealt with through PAYE.

HMRC has apologised for the error.

Deadline

Millions of people in the UK fill in self-assessment tax forms each year.

The deadline for online returns this year was 2 February, while paper returns would need to have been submitted by the end of the previous October.

All those on HMRC's records who did not complete a self-assessment form, as expected by the tax authority, received a letter in February or March.

It asked people to contact HMRC if they felt they no longer needed to be in the self-assessment system. For example, this could include somebody who was self-employed a few years ago, but was now employed by a firm, paid tax through PAYE and only had one source of income.

As a result of this request, 130,000 people were taken out of the self-assessment process and HMRC's records were changed.

However, 12,000 of these people have now received penalty notices in error.

"We are very sorry and can reassure these customers that we know who they are and that this letter is incorrect - they do not owe a penalty. We are writing to all of them to apologise and to explain this error," a HMRC spokesman said.

"It is very unfortunate that this process error has taken the shine off the good news that we have taken 130,000 people out of self-assessment."

Chas Roy-Chowdhury, of the Association of Chartered Certified Accountants (ACCA), said that HMRC should not be criticised for trying to simplify the system, by removing people from the self-assessment system when they need not be in it.

However, he said that cuts to the HMRC's resources meant that some errors were likely to occur.

New fine system

The letters explained that to add to the long-standing fixed penalty of £100 for late filing, fines of £10 a day kick in from Tuesday, up to a maximum of £900.

A further £300 can be levied after 6 months and another £300 after 12 months, adding up to a potential £1,600 in fines.

Anyone who should have filled in a self-assessment form, but has not - even if they do not owe any tax - faces these fines.

Some 850,000 people were sent penalty notices for failing to submit their tax returns on time this year - 550,000 fewer than a year ago.