HMRC Penalties

14 May, 2016

To most people it’s a mystery when HMRC send a tax demand which includes penalties. If they relate to a late tax return then you can expect a £100 fine if you are one day late after the January 31st deadline. You can appeal but don’t expect HMRC to be very flexible. remember they have heard every excuse before (see my earlier blo about tax return excuses) and you will need something that stands up to careful scrutiny. Fail to file your return by end end of February and HMRC are likely to start to charge daily penalties, which they can do for 90 days. And that is per outstanding return so if you have several oustnding the HMRC penalties can grow alarmingly and very quickly.
So what if you file the return but don’t pay the liability that is due. Well you will be charged 5% of the tax due once it is 30 days late, then another 5% (or £300 if that is greater) after a further three months. That repeats every twelve months but HMRC are likely to have chased you seriously and personally long before then.
If you make a mistake on your tax return then you may be subject to further penalties. You should not be charged for an error where you took ‘reasonable care’ but HMRC can do so if the mistake was ‘careless’ or ‘deliberate’. It’s understandable that deliberate errors should expect punishment but when are you being ‘careless’? In our experience HMRC think that is true most of the time and you will have to demonstrate the care you took. It is also possible to argue that penalties can be reduced and we have considerable exoerience in doing so, often successfully.
So, beware! Don’t ignore  HMRC penalities but don’t always assume that HMRC are right or justified in charging them. And certainly don’t do nothing if a penalty notice drops though your door.

Blog post by: Ian Marlow

Awards

HfM Tax & Accounts Winner 2019 - HfMTax.
Personal Tax Returns Adviser of the Year 2018 - HfMTax.
2016 Tax Awards Winner - Best UK Personal Tax Service Provider 2016