Penalty rates and structure for inaccuracies in returns

By Tolley in association with Philip Rutherford
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The following Corporation Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Penalty rates and structure for inaccuracies in returns
  • Penalty regime provisions from 1 April 2009
  • Commencement dates
  • Events triggering penalties

Penalty regime provisions from 1 April 2009

As part of their modernisation of powers, deterrents and safeguards, HMRC introduced a new penalty regime for errors in returns and documents with effect from 1 April 2009, which was extended from 1 April 2010. The main legislation is found at FA 2007, s 97, Sch 24 and FA 2008, s 122, Sch 40. This legislation was brought in to harmonise the penalty regime across all of the major taxes.

The main aim of the legislation was:

  • 1)to align the penalty regime across direct and indirect taxes, and
  • 2)to provide a deterrent to non-compliance by penalising those who fail to comply
  • 3)to encourage the non-compliant to return voluntarily to compliance

It was also envisaged that the new tiered regime would introduce fairer and more proportionate results for offences of differing levels of behaviour. HMRC made it clear in the 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 basis of calculation of penalties is a two-stage process:

  • 1)calculate a percentage, based on the taxpayer’s be

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