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News
HM REVENUE & Customs (HMRC) has introduced a new penalty regime to simplify the UK's tax system
The new legislation came into force in April 2009, and relate to personal tax returns, Corporation Tax, PAYE, CIS, VAT and NIC. The new penalties apply for errors during 2008/9 and later years, and to documents filed on or after April 1 2009.
It is designed to make returns easier and more consistent, and includes new penalties with the aim of helping those who try to comply – but punishing those who don’t.
There have always been penalties for incorrect returns or documents, but under the new regime the penalties are linked to the reason behind the error. The penalties are generally higher and can even apply where no tax is payable.
Basically, anyone who takes ‘reasonable’ care when completing a return will not be penalised, while those that don’t take ‘reasonable’ care, and where errors are found, will be penalised. Voluntary disclosure of an error will see a substantial reduction of any penalty.
But what constitutes ‘reasonable’ care? This will vary according to the person involved and the circumstances. Any penalty charged will be based on a percentage of the additional tax due, and the rate will depend on the ‘behaviour’ which caused the error. There are three types of behaviour:
- careless
- deliberate but not concealed
- deliberate and concealed.
For the more serious cases of deliberate concealment the penalty will be a minimum of 30 per cent
tax, up to a maximum of 100 per cent.
Businesses must review the way they record and report their transactions, especially any areas of uncertainty, because poor practice will be put to the test, and anything deemed by HMRC not appropriate or suitable could be exposed to the new penalty regime.
Therefore, clients need to work closely with their professional advisors to make sure they pay a reasonable and fair amount of tax.
HM Revenue & Customs now has considerable further powers to inspect records and “intervene” in current business accounts and/or tax returns. HMRC can also carry out checks in ‘real time’ instead of waiting for tax returns to be filed which can be up to 12 months after the year end.
Any business that is not 100% sure that its systems provide 100% correct figures for HMRC should seek expert advice as soon as possible to identify the required remedies.
In addition, April 2009 also marked the start of a new “aligned” appeals procedure which abolished the former Inland Revenue Commissioners hearings and former Customs and Excise Tribunal hearings.
The new rules include:
• an independent review of any dispute by HMRC
• a much reduced chance of recovering costs where HMRC withdraw from any appeal
To date HMRC confirmed that more than 60,000 businesses have deferred more than £1 billion of unpaid tax/VAT/PAYE/CIS under the ‘credit crunch’ Business Payment Support Scheme, which applies to personal tax bills as well as businesses.
Launched in the Chancellor’s pre Budget report, this welcome service helps companies that are struggling to meet tax, National Insurance and other payments to HMRC to set up affordable tax payment timetables.
Any business worried about meeting payments owed to HMRC, or which expects problems making payments in the future, should speak to us and make the most of this valuable scheme.