A Guide to Tax Penalties

A Guide to Tax Penalties

Not only have tax rules changed, but so have penalties since 1st April 2009. It is now possible for HMRC to impose penalties of up to 100% if it is proven that business owners have deliberately avoided paying the correct amount of tax.

Reasonable care

HMRC states, in its guide to the new regime; “We have always charged financial penalties for incorrect returns or documents. However, the way that penalties will be calculated in the future will be linked to the behaviour that gives rise to the error.

A simple translation of this is:- ‘you will have to pay a larger fine if HMRC believe that you have deliberately under calculated any taxes due’. Intrinsically implied in the aforementioned statement is also the notion that there has been a deliberate attempt to hide any errors made in the under calculation of tax.

Larger penalties will not be applied where HMRC are satisfied that reasonable care has been taken and an error has still occurred. Thus the onus will be on individuals or businesses to demonstrate that they have sought specialist advice.

Penalties

Penalties are calculated as a percentage of the extra tax due. The rate increases according to how “serious” HMRC consider the error to be:

  1. No penalties apply if ‘reasonable care’ has been taken
  2. Up to 30% for ‘careless behaviour’
  3. Up to 70% for ‘deliberate mistakes’
  4. Up to 100% for ‘deliberate and concealed mistakes’

 

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