Penalties

A new regime of penalties started in April 2008.

Under the new regime, the intention is that

People who make honest mistakes may not be punished, at all. Indeed, they will now be helped and supported by HMRC, and

People who deliberately make incorrect returns will be more harshly punished than previously.

A taxpayer who is honest and who has taken reasonable care, and an honest taxpayer who has been careless but makes a full unprompted voluntary disclosure, should not be penalised.

In contrast, a dishonest taxpayer will face a minimum penalty of 70% of the potential lost revenue - or even a penalty of 100% (of the potential lost revenue - that means paying double the tax etc plus interest) if they take steps to conceal the inaccuracy.

This means that if you are honest, the definition of reasonable care becomes crucial. You can find some online help on HMRC's interpretation of reasonable care at http://www.hmrc.gov.uk/manuals/chmanual/CH81120.htm. You'll find loads more of great interest if you follow this link and kick around that section of HMRC's website.

HMRC accepts that there is no one universal standard for all taxpayers. "What is necessary for each person to discharge that responsibility has to be viewed in the light of that persons' abilities and circumstances." Again, see CH81120 at http://www.hmrc.gov.uk/manuals/chmanual/CH81120.htm.

Another exciting change is the introduction of suspended penalties. www.hmrc.gov.uk/manuals/chmanual/ch83110.htm.

Give us a call if you would like to know more. See contact Us.

Source:TaxLine, The Tax Faculty, Institute of Chartered Accountants in England & Wales, www.icaew.com/taxfac.
Article written by Lynette Bober about a talk given by Rebecca Benneyworth

5-October-2008