The new penalty regime applies for all returns due to be submitted after 6 April 2009. The current system of negotiated penalties will disappear and be replaced with a statutory system of tax geared penalties. The new system is likely to result in substantially higher penalties.
Returns affected will be:
1. Self assessment returns for 2008-09
2. For companies the first affected return will be for the year ending 31 March 2009.
3. Payroll returns P35 etc for 2008-09
4. VAT returns for all quarterly returns due 31 March 2009 and thereafter.
Amounts of penalty
The penalty rates rise according to the behaviour of the taxpayer giving rise to the inaccuracy. The rates of penalty are as follows:Behaviour | Maximum Penalty Rate |
| Careless | 30% of lost tax |
| Deliberate but not concealed | 70% of lost tax |
| Deliberate and concealed | 100% of lost tax |
No penalty will be charged in cases where it can be argued that a taxpayer has taken reasonable care to get things right and despite this, make a mistake. In practice, HMRC agreeing to a £Nil penalty is unlikely.
Disclosure
Taxpayers will be able to reduce the gross penalties shown above by making a disclosure of an inaccuracy. A disclosure of the inaccuracy is defined by the legislation as:
• Telling HMRC about the inaccuracy,
• Giving HMRC reasonable help in qualifying the inaccuracy or under assessment, and
• Allowing HMRC access to records for the purpose of ensuring that the inaccuracy or the under assessment is fully corrected. Mitigation of these penalties will also depend on whether the disclosure is unprompted or prompted
Reasonable care
Appointing a tax advisor to deal with returns only amounts to ‘taking reasonable care’ when the records are provided giving the tax advisor ample time to process the relevant return. E.g. providing the tax advisor with information just before the appropriate deadline (even where we turn these around) – will amount to failure to take reasonable care. Careful negotiation with HMRC will be required in all cases.
For information on HMRC's new inspection powers click here
RMT can provide advice on all aspects of dealing with HMRC investigations including ‘health checks’ of business records in preparation for an inspection or compliance visit.
For confidential advice, please call John Richards (Managing Partner) on 0191 256 9500 or email advice@r-m-t.co.uk