New tax penalties begin to bite from 1 April

Editorial team
AccountingWEB.co.uk
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HMRC has issued a notice warning taxpayers and advisers of new penalties coming into force this week.

Among the changes is a new ‘failure to notify penalty’ affecting those who fail to register for tax or declare taxable income. 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.

AccountingWEB members will already be aware of the new inaccuracy penalty (introduced last April) across the main taxes, which is being extended to almost all other taxes from 1 April. Where HMRC deems that ‘insufficient care’ has been taken, a penalty is charged which is a percentage of the additional tax that is due. The maximum rate can be 10...

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Deemed Insufficient Care

Hmmmm!

"Where HMRC deems that ‘insufficient care’ "

Does that mean that I need to start hiring QC's to help with my Tax returns. After all tax case law is tricky and open to interpretation.

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Fair judgement?

Will HMRC also be penalised for failing to take reasonable care, or failure to notify?

I imagine there are few accountants that have not suffered stress and loss of time because of HMRC's lack of care, and I can think of many examples of increased penalties because HMRC did not notify anyone of the penalties until many months after the event.

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HMRC take a harsh view on 'reasonable care'

Quite shocked by the recent Tribunal case TC00425: Adrian Waddington.

I've written about it on the TaxBuzz blog under the title: No 'reasonable excuse' for this waste of public funds

In summary though, the case concerned a claim of 'reasonable excuse' over a 5% surcharge of £219.52.  The taxpayer is an employee who has always filed his returns and paid his taxes on time. The Tribunal found him an entirely credible witness and there was no dispute as to the facts which are not complicated.

It was also clear that there would have been no possibility of a surcharge had HMRC dealt with Mr Waddington's affairs in a more timely manner.

It seems to me that the surcharge rules operate unfairly in a case like this where HMRC issue tax returns late through no fault of the taxpayer. This would not be a problem if HMRC were themselves 'reasonable' when considering whether a taxpayer has a 'reasonable excuse' for the late payment of their tax. The Tribunal was quite clear that such an excuse existed. When HMRC adopt a heavy handed approach as they did in this case, they risk bringing the system into disrepute.

Mark Lee

TaxAdviceNetwork.co.uk

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