Tax Penalties - How Do You Measure Up
HM Revenue & Customs (HMRC) acknowledge that most people do take care to declare and pay the right amount of tax. They use penalties to stop people who don’t take care from gaining an unfair advantage.
After consultation, HMRC are replacing a wide variety of penalties for inaccurate tax returns with one system across almost all taxes.
When does it apply?
HMRC can charge a penalty if your return or other tax document is inaccurate and as a result you don’t pay enough tax, or if you don’t tell them a tax assessment they have sent to you is too low.
The new penalty system applies to documents with return periods from 1 April 2008 where the documents are due to be filed from 1 April 2009 for:
• Capital Gains Tax
• Construction Industry Scheme
• Corporation Tax
• Income Tax
• National Insurance contributions
• PAYE
• VAT
How does it work?
You will have to pay the additional tax and any interest that is due. If HMRC charge a penalty it will be a percentage of the additional tax. The penalty rate now depends on the type of inaccuracy. The more serious the reason for the inaccuracy the higher the penalty can be. HMRC will not charge a penalty if you took ‘reasonable care’ to get things right but still made a mistake.
If you send HMRC an incorrect document they will charge a penalty if the inaccuracy:
• is because you failed to take reasonable care – you were careless
• is deliberate – you intentionally send them an incorrect document
• is deliberate and concealed – you intentionally send them an incorrect document and try to conceal the inaccuracy
Some of the ways you can show you took reasonable care, and avoid a penalty include:
• keeping accurate records to make sure your tax returns are correct
• checking what the correct position is when you don’t understand something
• telling HMRC promptly about any error you discover in a tax return or document after you’ve sent it.
The David Allen & Co specialist tax consultants can help make sure your record keeping systems and financial information is accurate and also make sure that your tax bill is no bigger than it needs to be.
After consultation, HMRC are replacing a wide variety of penalties for inaccurate tax returns with one system across almost all taxes.
When does it apply?
HMRC can charge a penalty if your return or other tax document is inaccurate and as a result you don’t pay enough tax, or if you don’t tell them a tax assessment they have sent to you is too low.
The new penalty system applies to documents with return periods from 1 April 2008 where the documents are due to be filed from 1 April 2009 for:
• Capital Gains Tax
• Construction Industry Scheme
• Corporation Tax
• Income Tax
• National Insurance contributions
• PAYE
• VAT
How does it work?
You will have to pay the additional tax and any interest that is due. If HMRC charge a penalty it will be a percentage of the additional tax. The penalty rate now depends on the type of inaccuracy. The more serious the reason for the inaccuracy the higher the penalty can be. HMRC will not charge a penalty if you took ‘reasonable care’ to get things right but still made a mistake.
If you send HMRC an incorrect document they will charge a penalty if the inaccuracy:
• is because you failed to take reasonable care – you were careless
• is deliberate – you intentionally send them an incorrect document
• is deliberate and concealed – you intentionally send them an incorrect document and try to conceal the inaccuracy
Some of the ways you can show you took reasonable care, and avoid a penalty include:
• keeping accurate records to make sure your tax returns are correct
• checking what the correct position is when you don’t understand something
• telling HMRC promptly about any error you discover in a tax return or document after you’ve sent it.
The David Allen & Co specialist tax consultants can help make sure your record keeping systems and financial information is accurate and also make sure that your tax bill is no bigger than it needs to be.