Most people take care to declare and pay the right amount of tax on time. HM Revenue & Customs (HMRC) use penalties to stop people who don't take care from gaining an unfair advantage. After listening to taxpayers, accountants and others, HMRC are changing some penalties to make them simpler and more consistent.
Three new penalties may be applied from 1 April 2010. A penalty may be due if your return or other tax document was inaccurate and tax has been unpaid, understated, over-claimed or under-assessed as a result. You may also face a penalty if you don't tell HMRC that an assessment is too low. You will still have to pay the tax due, and in some cases interest as well.
Your behaviour can affect the penalty and HMRC may reduce the percentage they charge if you:
From 1 April 2009 there is a penalty for inaccurate tax documents and returns. This penalty 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. See list of affected taxes.
Under the new system HMRC will not penalise you if you take reasonable care to get your tax right. Taking reasonable care includes:
From 1 April 2010 HMRC can apply a penalty if people don't tell HMRC about a tax obligation at the correct time. See list of affected taxes.
The failure to notify penalty will most commonly apply where you don't tell HMRC at the right time that:
From 1 April 2010 HMRC will apply wrongdoing penalties where a person:
This penalty applies to anyone registered for VAT or excise, anyone who should be registered to pay VAT or excise duties and to other members of the general public.
New legislation to strengthen excise powers to investigate and tackle fraud takes effect from 1 April 2011. The aim is to protect legitimate businesses and the revenue.
From 1 April 2010 HMRC can publish the names and details of individuals and companies HMRC penalise for deliberately evading at least £25,000 of their tax obligations - see Publishing details of deliberate tax defaulters Questions and Answers for more details.
Our factsheets explain how HMRC check your tax. During a check an HMRC officer may give you one or more factsheets to help you understand what is happening and what your rights are. They will also give their contact details so you can ask questions about the check, and any penalties.
Leaflets explaining the penalties and how you can avoid them
Other useful information