Tax return penalties
HRMC has provided fresh guidance as to how the new penalty regime will operate from 1 April 2009.
The new regime will apply to all tax filings due on or after 1 April 2009 for the following taxes; Income Tax, VAT, employers PAYE, National Insurance contributions, Corporation Tax, Capital Gains Tax and the Construction Industry Scheme.
From 2010 it is expected that the new penalty regime will be extended to most other taxes, levies and duties handled by HMRC.
The new rules are intended to ensure that tax returns are completed correctly using reasonable care. HMRC’s definition of reasonable care includes the requirement for businesses to keep accurate and compliant records and immediately disclose any errors to HMRC. HMRC will not penalise businesses that make a genuine mistake whilst taking “reasonable care”.
The sting in the tail is where a business does not take “reasonable care”. In this scenario the business will suffer higher penalties than is currently the case. Penalties will increase further in cases of deliberate error. As is currently the case, disclosure will usually result in reduced penalties.