A4.536 Penalties for inaccuracy—equivalent penalties under pre-harmonised regime
Under the equivalent pre-harmonised penalty regime, HMRC could impose a penalty in respect of an error in a specified type of document which resulted from fraud or negligence on the part of the taxpayer1.
As there is a time limit of 20 years for HMRC to raise an assessment in a case where the taxpayer has acted fraudulently, penalties will still be imposed under the pre-harmonised regime, albeit with increasing rarity, until the early 2030s.
Penalties were most commonly imposed for:
• incorrect returns of accounts for income tax or capital gains2
• incorrect partnership returns or accounts3
• incorrect returns, statements, or declarations by a company in connection with any claim for any allowance, deduction, or relief4
• failing to correct a return or accounts after the error had come to the taxpayer's notice5
• assisting in the preparation of incorrect returns of another person6
Calculation of penalties
The general principle was that the maximum penalty was an amount equal to the 'tax difference'. In a case where the taxpayer paid too little, the tax difference was the difference between:
• the amount of tax (and NIC) correctly payable for the relevant year(s) of assessment or accounting period, including tax deducted at source and not repayable, and
• the amount which would have been so payable on the basis of the incorrect return
In a case of excessive repayment, the tax difference was calculated on the basis that a repayment represents a negative amount
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