HM Revenue & Customs is introducing a simpler and more consistent system of penalties for errors in tax returns across its main taxes. Most customers have relatively simple tax affairs so don't have to complete a tax return and will be unaffected. But Self Assessment taxpayers, which include for example some pensioners, will be affected. Here's the brief Internet guidance on who has to complete a Self Assessment return.
The penalties initially apply to Income Tax, VAT, Employers paying PAYE, National Insurance contributions, Corporation Tax, Capital Gains Tax and the Construction Industry Scheme. They will apply for these taxes to errors in tax returns or other documents, for periods starting on or after 1 April 2008, that are due to be filed on or after 1 April 2009.
Most people take care to fill in their tax returns and documents correctly. We want to encourage that so if a customer takes reasonable care to get it right, we will not charge them a penalty even if they make an error.
But what is necessary for each person to take reasonable care has to be viewed in the light of their abilities and circumstances. For example, we would not expect the same level of knowledge or expertise from a self-employed and unrepresented individual as from a large multi-national company.
Some of the ways a taxpayer can show they took reasonable care are:
If they don't take reasonable care, we can penalise any errors. The penalties will be higher if the errors are deliberate.
We want people to come forward when they think there is a problem with their tax affairs. We can substantially reduce any penalty due if they tell us about errors, especially if this is unprompted.
A taxpayer can appeal against a penalty.
