New tax penalties will bite hard

Changes to align powers, deterrents and safeguards in the tax system will be introduced by HM Revenue & Customs

(HMRC) from 1 April 2010.


The changes cover the following three key areas:

Failure to notify penalty

People and companies that fail to register for tax or declare taxable income will face a failure to notify penalty.

HMRC has always charged penalties if people don’t register for tax or declare their tax liabilities. But from 1 April, there will be a single consistent penalty system across most taxes.

Inaccuracy penalty

An inaccuracy penalty, introduced last April across the main HMRC taxes for inaccurate tax documents and returns, is being extended to almost all other taxes.

Most people take care to declare and pay the right amount of tax on time. But where there is insufficient care, a penalty is charged, which is a percentage of the additional tax that is due. The maximum rate can be 100 per cent where someone has deliberately evaded their tax and tried to conceal it.

Under this penalty, however, if reasonable care is taken to get the tax right, customers will not be penalised if they make a mistake. Ways that customers can show they have taken reasonable care include keeping accurate records to make sure tax returns are correct, and checking what the correct position is when something is not understood.

Compliance checks

Compliance checks legislation, which came in last April, set out a consistent system across the main taxes for how HMRC checks that a company’s or an individual’s tax is correct. This is being extended to include: Aggregate Levies; Climate Change Levies; Inheritance Tax; Insurance Premium Tax; Landfill Tax; Petroleum Revenue Tax; Stamp Duty Land Tax; and Stamp Duty Reserve Tax.

Dave Hartnett, HMRC Permanent Secretary for Tax, said:

“These changes underpin our drive to improve tax compliance in the UK. They are carefully constructed to support and encourage those who make a genuine effort to get their tax right, while coming down hard on those who don’t.”

Source: © HM Revenue & Customs

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