Tax Update (March 2009)
New Penalty regime
The new penalty regime comes into effect in respect of returns
that are due to be filed on or after the 1st of April
2009 and includes Income Tax (including Self Assessment), VAT,
employers paying PAYE, National Insurance Contributions,
Corporation Tax, Capital Gains Tax and the Construction Industry
Scheme (CIS).
HM Revenue & Customs (HMRC) have always charged penalties
for incorrect returns or documents but what is different about the
new regime is that penalties will be charged based on the behaviour
that gives rise to the error.
The behaviours that will incur a penalty are where the error is
because you failed to take reasonable care, or where the error is
deliberate but unconcealed (do not attempt to hide the error), or
where the error is deliberate and concealed (take active steps to
hide the error). You will not be charged a penalty where you took
reasonable care but still made an error. This will also take into
account your discovery of an error after you have sent the return
and how soon you notify HMRC.
Reasonable care will vary from individual to individual
dependant upon their particular circumstances but some ways you can
show you took reasonable care are by keeping accurate and up to
date records, retaining your records in case you need them later,
checking the correct position where you do not understand
something, or seek advice from a competent advisor, or telling HMRC
promptly about an error you discover after you have sent your
return.
You can reduce the penalty due if you tell HMRC about any errors
without being prompted, help them work out any extra tax is due and
allowing them to check your figures.
The penalties will be a percentage of the extra tax due but the
rate will be dependent upon your behaviour as follows:
|
|
Reasonable care
|
Careless
|
Deliberate but unconcealed
|
Deliberate and concealed
|
|
Minimum
|
No penalty
|
0%
|
20%
|
30%
|
|
Maximum
|
No penalty
|
30%
|
70%
|
100%
|
Following discussions HMRC will issue a penalty notice. You will
still have the right to appeal against the decision.