Taxpayers face fines for delay

Millions of taxpayers face a deluge of fines from the Inland Revenue, netting hundreds of millions of pounds for the Government, because of continuing confusion over the new self- assessment tax return form.

With just 15 days to go before the first 30 September deadline, the Revenue confirmed yesterday that almost 5 million taxpayers out of the 8 million involved had not yet submitted their returns. Taxpayers have until the end of this month to submit forms if they want the Revenue to calculate any tax owing on their behalf.

If people do not send in payments by the final 31 January deadline they will receive an automatic penalty of pounds 100, followed by another automatic pounds 100 fine if they money is still outstanding a month later. Though taxpayers can ask the Revenue to carry out the tax assessment after this month, the department cannot guarantee that it will respond in time.

Peter Black, a tax expert and former Revenue official, warned: "By the end of the month there will be absolutely no help available for those who find the new forms daunting or difficult to understand."

Self-assessment, first announced by the previous government in 1993, is the biggest change to the British tax system since the introduction of the pay-as-you-earn system after the Second World War. The Inland Revenue is spending more than pounds 5m on a public information campaign, most of which will be used to explain the deadlines and penalties.

The Revenue yesterday insisted the introduction of self-assessment was going to plan, in line with its estimate that 4.8 million taxpayers would submit returns by the end of this month. The rest were expected to calculate their own tax burden by 31 January.

"Most tax advisers are almost certain to do the calculations for their clients. We will be reminding people, but at this stage anyone talking about penalties is guessing," said a spokeswoman.

She defended the clarity of the forms and the accompanying crop of explanatory leaflets. "In many cases people have received no more paperwork than under the old tax return system. Our helpline has also been very busy at weekends when many people work on their forms."

But concerns about the scale of the fines will continue well into next year as the Revenue sifts through the forms to see whether self-assessments have been accurate. There are heavy penalties for underestimates which inspectors consider intentional.

The self-assessment form has fuelled an alarming growth in companies offering tax advice, an industry which has remained totally unregulated. Taxpayers often have to take pot luck, as accountants and reputable consultants bid for work alongside rogue agencies.

The Revenue has already faced mounting concern over the new computerised version of the tax return form, which can be filed electronically using special software. A review of the project was launched last month after accountants and computer experts complained that the Revenue's computer was rejecting a large number of returns.