HMRC penalties and reasonable care
Updated June 2008

If you are in business or have complex tax returns to submit you should be taking an interest in the new penalty regime which applies from 1 April 2008.

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:

The rate of penalty for an error where the taxpayer has taken reasonable care is zero – thus if taxpayers take care and despite this make a mistake they will not be penalised for that mistake.

Disclosure

The current scheme of mitigated penalties will no longer apply, but taxpayers will be able to reduce the gross penalty 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.

Reasonable care

A key consideration is the definition of reasonable care. It you are seen to be taking reasonable care you should be able to avoid penalties, if not penalties will automatically apply.
 

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