Why did HMRC remove the £100 fixed penalty for Class 2 National Insurance contributions?
Before 1 April 2010 there was a fixed £100 penalty if someone notified, more than three months late, that they had commenced self-employment. During the Powers Review consultation in 2008, customers, accountants and representative bodies stated that this penalty was counter-productive. It could, at a crucial stage, damage relations between HMRC and customers. Although the fixed penalty reinforced the obligation for early notification it did not encourage people to come forward. It often meant the first response from HMRC to a new business that approached it was to impose a penalty. The new system is more proportionate because a penalty will be related to the amount National Insurance contributions unpaid because of late notification.
