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New HMRC Penalties

27th April 2009

There have been significant changes in the approach HMRC will be taking to all tax returns relating to periods starting after 1 April 08, where the due date for filing is after 1 April 09.

Current Penalties

At present, HMRC will charge a penalty if they think the taxpayer is guilty of deceitful or careless conduct. This can be anything from forgetting to include a single item in a tax return, to planned tax fraud. The penalty levy starts at a maximum of 100% of the tax and can be reduced at HMRC discretion, depending on things like whether they believe the tax payer was cooperative, the gravity of the offence, etc. Negotiation has always been a possibility in reducing the penalty payable, but this is no longer the case.

New Penalties

HMRC are expecting all taxpayers, whether individuals or large businesses to have reliable record keeping systems in place and to have submitted all tax returns with “reasonable care”. Large businesses are expected to have expert accounting systems in place, and individuals are expected to maintain thorough records. Should one be investigated, HMRC will then analyse the system used and determine whether “reasonable care” was applied, if an honest mistake is identified there will be no penalty. However, there is no definition of ‘reasonable care’ and this will be decided on by HMRC on a case by case basis.

The new legislation sets a maximum penalty for each type of offence, the levels of which are far higher than in times gone by when negotiation was a possibility.

The utmost care needs to be taken in all your record keeping to ensure it is accurate and complete.

For those of you that would like us to prepare your personal tax return, we will soon be starting our Self Assessment Campaign for the tax year ending April 09, please contact us on 020 7324 6020.

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