RCB/19/08 New penalties for errors in returns and documents

RCB/19/08 New penalties for errors in returns and documents

Revenue & Customs Brief, Issue 19. 1 April 2008

Introduction

This brief explains how the new penalties will affect our customers and their advisers.

HM Revenue & Customs (HMRC) inherited a confusing variety of penalty charging powers. The new penalties are one of the first pieces of cross cutting legislation designed to make the tax system simpler and more consistent. It follows consultation with our customers and other interested parties during the Review of Powers, Deterrents and Safeguards.

The legislation aims to help those who try to comply, and come down hard on those who don't. The clear messages for customers are that:

1.  

   —     if they take reasonable care when completing their returns they will not be penalised

2.  

   —     if they do not take reasonable care, errors will be penalised and the penalties will be higher if the error is deliberate

3.  

   —     disclosing errors to us early will substantially reduce any penalty due

Taxes affected

The new penalties are for errors on returns and documents initially for VAT, PAYE, National Insurance, Capital Gains Tax, Income Tax, Corporation Tax and the Construction Industry Scheme.

For these taxes, it applies to returns or other documents for tax periods starting on or after 1 April 2008 that are due to be filed on or after 1 April 2009. The legislation is Sch 24 of the Finance Act 2007.

When can a penalty for inaccuracy be charged?

Two conditions must be satisfied before we can charge a penalty.