A Judge has indicated that fines automatically awarded to people who file their tax returns late may not be legal.
The news comes shortly before the Wednesday 31 January Self Assessment deadline.
Under current procedure, an automatic fine of £100 is handed down to self-employed taxpayers who watch the deadline pass, even if it is just by a minute.
But in a recent Tax Tribunal, a judge has suggested that it is only legal to hand out such a fine if it is done by a human employee.
Onlookers say the ruling could cost HM Revenue & Customs (HMRC) millions of pounds in backdated penalties.
The latest figures suggest that around 800,000 miss the Self Assessment deadline each year.
Judge Richard Thomas, presiding over the case, said: “In my view the requirement…is for a flesh and blood human being who is an officer of HMRC to make the assessment, that is to decide to impose the penalty and give instructions which may be executed by a computer.”
An HMRC spokesperson said: “This case was about whether the company had a reasonable excuse for filing late.
“This type of penalty is applied to encourage companies to comply with their obligations, to act as a sanction for those who don’t and to reassure the compliant majority that they will not be disadvantaged by those who don’t play by the rules.
“Penalties issued by HMRC to those who file late are due and payable. Any taxpayer with a reasonable excuse for filing late should get in touch with us.”