The new all tax penalty regime…
... is expected to take effect for periods starting after 31 March 2008 where the return is filed after 31 March 2009.
The new system distinguishes between different types of tax “offence” for example, heavy penalties for evasion, but an acknowledgement that genuine errors happen.
HMRC appears to want to encourage compliance and sees penalties as an essential element in enforcement.
The result is that the new penalties will apply to returns for income tax, corporation tax, pay as you earn, national insurance contributions and VAT.
The new regime seeks to grade the penalty to match the ‘offence’. There are effectively four categories:
- Innocent mistake;
- Careless conduct;
- Deliberate action, but not concealed; and
- Deliberate action with concealment.
Innocent mistakes will no longer attract a penalty. The penalties for the other three conducts are laid down with prescribed reductions for disclosure (differentiating between prompted and unprompted). The proposed penalties range from 15% to 30%, for a prompted disclosure for ‘failure to take reasonable care’, to 100% of the tax due for a ‘deliberate understatement with concealment’.
It will be “interesting” to see how HMRC will distinguish between innocent mistakes and a ‘failure to take reasonable care’. This is likely to be an area for debate, dispute and potential litigation.
You should be aware that unprompted disclosures will reduce penalties to nil for potentially minor offences.
Additionally, in cases of ‘failure to take reasonable care’, HMRC has the discretion to apply a suspended penalty. If the correct procedure is implemented and adhered to, the penalty could be cancelled.
One thing that is clear is that a lot of businesses and individuals will be affected.
Date: 4th March, 2008
Articles from this Author
1st November, 2018
Budget 2018 - Changes for businesses
22nd October, 2018
Making the most out of your home? Rent a room relief
3rd May, 2018
Tax changes for non-resident corporate landlords
4th April, 2018
EMI options - a current risk
Contact Business Service Partners
Choose from the drop down menu below to select a Partner to contact.
Season’s Greetings and Happy New Year from everyone at Mercer & Hole pic.twitter.com/x4o1o9tbWP
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole