Take care to avoid a penalty

Most people take care to declare and pay the right amount of tax on time, and HM Revenue & Customs (HMRC) wants to encourage that. HMRC uses penalties to stop people who don't take care from gaining an unfair advantage.

After listening to taxpayers, accountants and others, HMRC is changing some penalties to make them simpler and more consistent.

How does this affect me?

From 1 April 2009 there is one penalty system for inaccurate tax documents and returns across the main taxes. It replaces a wide variety of penalties and initially applies to:

• Capital Gains Tax
• Construction Industry Scheme
• Corporation Tax
• Income Tax
• National Insurance contributions
• PAYE
• VAT

It applies to returns or other documents for return periods starting on or after 1 April 2008 that are due to be filed on or after 1 April 2009.

Under the new system if you take reasonable care to get your tax right, HMRC will not penalise you, even if you make a mistake.

Taking reasonable care includes:

• keeping accurate records to make sure your tax returns are correct
• checking what the correct position is when you don't understand something
• telling HMRC promptly about any error you discover in a tax return or document after you've sent it

If you don't take reasonable care HMRC will penalise inaccuracies. Telling HMRC about inaccuracies will substantially reduce any penalty due, in some cases to zero.

You should check your systems and records will help produce accurate tax returns.

What changes in April 2010?

The new penalties for inaccuracies will be extended to almost all taxes for return periods starting on or after 1 April 2009, for documents that are due to be filed on or after 1 April 2010.

HMRC is also introducing one consistent penalty system across most taxes when people fail to notify a new tax liability or a new activity on which tax is due.

And there will be a new penalty system for VAT and Excise wrongdoing.

Further information

• What happens when we find something wrong (PDF 72K)
• A simple summary of the inaccuracy penalty (PDF 40K)
• Find out more about keeping records
• Q&A briefing on all penalty changes
• Technical and operational guidance for the new penalties
• Take our short online learning module to understand how the inaccuracy penalty will affect the other taxes from 1 April 2010
• Take our short module to understand how the inaccuracy penalty affects the main taxes from 1 April 2009
• Take our in depth self learning module to better understand the inaccuracy penalty legislation and how HMRC will apply it
• Agents' presentation on new penalties (PPT 529K).
  Use this presentation to show your clients how the new penalty system works.
• Print leaflet (PDF 900K)
  To order copies of the leaflet please email New Penalties including your name, quantities and delivery address
• How we check your tax

If after checking our further information you still have a query please email

New Penalties