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Penalties may be charged by HMRC for a variety of reasons. They are charged at various amounts, based on the potential amount of tax lost and the reason behind it. To avoid penalties, consult an accountant for advice so that you are aware of when you may be charged for a misdemeanour.

The penalty system

The new penalty system was introduced on 1st April 2009 and, since then, the scope of the scheme has been broadened. If documents are found to be inaccurate and tax that was due has been lost, a penalty will be charged. Customers have a responsibility to check all documents, including assessments, and if they are inaccurate to contact HMRC immediately.

Who is responsible for penalties?

Responsibility for penalties remains with a taxpayer, even if they have provided written authority for an agent to act on their behalf. Agents can deal with HMRC on behalf of clients, but won’t be responsible for the payment of penalties. All tax returns, assessments and other documents should be checked by a customer to ensure accuracy.

Late filing and payment

The most common reasons for issuing a penalty are late filing of documents and late payment of tax. HMRC issues strict deadlines for payments and filing. If you don’t meet the deadlines, you will be charged penalties. A self assessment tax return has to be filed by 31st October if it’s a paper copy or 31st January if it’s filed online, but both methods will attract a penalty charge if the deadlines aren’t met. Tax has to be paid by a specified date and if it remains unpaid, it will attract a penalty charge. VAT deadlines and payments, Corporation Tax and PAYE are all subjected to penalty charges if the deadlines remain unmet.

Errors on documents

Errors made on tax returns and other documents can attract a penalty charge. If the error leads to tax liability being misrepresented or the amount of tax charged being too low, penalties are likely to be charged. If you help to rectify the error and the correct amount of tax is paid, the penalty may be reduced. Customers are expected to demonstrate ‘reasonable care’ when preparing documents or completing forms, like tax returns. A lack of reasonable care will also attract a penalty charge. Failure to notify HMRC of becoming liable to tax may also attract a penalty charge. Consult a professional to discover how penalties can be avoided.

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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