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The latest figures for penalty charges, obtained from HMRC, indicate that the organisation is more likely to decide that an error is deliberate rather than a simple mistake.

The number of penalties being issued has recently increased, along with the amount charged for those who have inaccuracies on their return. Some experts in the accounting profession have considered HMRC to be taking a much harder stance against inaccuracy for a while. There is also a suspicion among some that HMRC is trying to increase tax revenues by classing blunders that are genuine as deliberately made.

Statistics viewed by Telegraph Money may support this theory. Penalty notices in 2012-13 were handed to more than 5,000 for “deliberate” mistakes, which includes purposely understating income. This figure increased to nearly 15,000 in 2013-14. The total percentage of penalties issued for intentional errors during that period, has increased from nine to 16 per cent. Figures were obtained by an expert in tax investigations, Mike Down, under the Freedom of Information Act. Although he had initially believed that some officers of HMRC may be more likely to class an error as deliberate in an attempt to increase revenues, following the release of the information he commented:

“Clearly, deliberately evading tax is a serious matter and HMRC is right to try to tackle it.

“By seeking more deliberate penalties, taxpayers are being hit harder and greater numbers of people are being put at risk of being named and shamed.”

Penalties for tax return mistakes

Penalties may be charged by HMRC for tax return errors, and the amount will depend on whether the organisation believed the blunder was genuine or deliberate, along with the Potentially Lost Revenue, or PLR. If a mistake is genuine and you come forward to correct it immediately, you may not have to pay a penalty. If HMRC discovers an error and believes it was made deliberately to conceal income, you could be charged a penalty – potentially up to 100 per cent of the tax due.

How are penalties calculated?

If you are believed to have taken reasonable care to fill in the tax return, no penalty will be charged. However, an error made due to carelessness could be charged a penalty up to 30 per cent of the total tax bill. For mistakes that HMRC believes have been done to understate income figures, a fine of between 20 and 70 per cent will be charged. Deliberately mistakes and concealments will be charged between 30 and 100 per cent of the tax due.

To avoid making errors on your tax return, contact us here at The Accountancy Partnership.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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