Date of issue: 8TH April 2009

BEWARE SUBSTANTIAL FINES FROM NEW TAX PENALTIES

Chartered accountants Clement Keys are warning businesses that a new tax penalty regime introduced by HM Revenue & Customs (HMRC) could lead to substantial fines, so says director of VAT services Steven Simmonds.  

From 1^st April 2009 if a business makes an error which is considered careless, under the new regime the penalty will be up to 30% of the extra tax due.  If the error is deliberate, a penalty of between 20% and 70% of the extra tax due will apply and if it is both deliberate and concealed, a penalty of between 30% and 70% of the extra tax due will be incurred. 

Reductions to these penalties will be allowed where a business tells HMRC about its errors, helps HMRC to work out what extra tax is due and gives HMRC access to its records to check the figures.  However, a penalty can be avoided altogether if a business can show it has exercised ‘reasonable care’.   

“Everyone has a responsibility to take ‘reasonable care’ and although HMRC has not provided us with a definition, the good news is that when assessing ‘reasonable care’ it will take into consideration the capabilities of the individuals completing the returns and the prevailing circumstances,” says Simmonds The new penalty regime will apply to an inaccuracy contained in (or an under-assessment relating to) a return or other document which is due to be filed on or after 1 April 2009 and returns or other documents (or under-assessment) relating to a tax period beginning on or after 1 April 2008.                                           

“HMRC wants to persuade businesses to become more compliant so the message is, if you do not know the correct tax treatment, ask for guidance – either from HMRC or your tax adviser – do not guess,” adds Mr Simmonds.