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New tax penalties begin to bite from 1 April

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 Issued 31 March 2010 11:42

Changes to align powers, deterrents and safeguards in the tax system will be introduced by HM Revenue & Customs (HMRC) from 1 April.

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 donít 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 companyís or an individualís 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:

ďThese 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 donít.Ē

Notes

1. The failure to notify legislation falls under Schedule 41of the 2008 Finance Act. For more details of the penalty: www.hmrc.gov.uk/about/new-penalties/failure-to-notify.pdf

2. The inaccuracy penalty legislation falls under Schedule 24 of the 2007 Finance Act. It is being extended to other taxes under Schedule 40 of the 2008 Finance Act. For details: www.hmrc.gov.uk/about/new-penalties/penalties-leaflet.pdf

3. The compliance checks legislation falls under Schedules 36, 37 and 39 of the 2008 Finance Act. It is being extended to other taxes under Schedules 48, 50 and 51 of the 2009 Finance Act. For more details of compliance checks: www.hmrc.gov.uk/compliance/cc-fs1.pdf

www.hmrc.gov.uk/about/new-compliance-checks.htm

4. More general information about new penalties: www.hmrc.gov.uk/about/new-penalties/index.htm.


About the Author

© Crown Copyright 2010.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.



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Article Published/Sorted/Amended on Scopulus 2010-04-02 09:48:09 in Tax Articles

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