Introduction

As part of its modernisation of powers, deterrents and safeguards, HMRC introduced a harmonised penalty regime for errors in returns and documents with effect from 1 April 2009. The regime was extended to a wider range of taxes from 1 April 2010. The main legislation is found at FA 2007, Sch 24. This legislation was brought in to simplify and harmonise the penalty regime across all of the major taxes.

The main aim of the legislation was to:

1. •

   align the penalty regime across direct and indirect taxes

2. •

   provide a deterrent to non-compliance by penalising those who fail to comply

3. •

   encourage the non-compliant to return voluntarily to compliance

It was also envisaged that the tiered approach under the regime would introduce fairer and more proportionate results for offences of differing levels of behaviour. HMRC made it clear in the original consultation that it felt higher penalties were appropriate for those who did not disclose errors unless prompted and / or did not cooperate in a check of the returns.

The