HMRC Penalties

The UK tax authorities have been under significant pressure from the exchequer to increase the level of tax revenues collected. This pressure has resulted in an increase in both the number of and size of fines being levied by HMRC and also a perceived unwillingness to accept ‘reasonable excuses’ from tax payers.

HMRC Penalties

Some of the penalties are triggered automatically, for example due to the late filing of a tax return. Others are linked to the level of tax owed if, for example, a return has been completed inaccurately. Mistakes that are considered careless (as opposed to being deliberate) and where the taxpayer notifies HMRC can attract penalties of 0-30%. In cases where HMRC have prompted the taxpayer however, penalties are in the range of 15-30%.

A common cause for penalties to arise is where a taxpayer has not declared child benefit when their income exceeds £50,000 pa.

HMRC PenaltiesHMRC Penalties can be suspended

Since 2007, if a taxpayer makes a careless mistake on their return and hence under states the amount of tax due, they may ask that any penalty is suspended and may even be able to suggest the terms of that suspension. It is important to remember that it is entirely at HMRC’s discretion whether they agree to any such suspension and suspension does not extend to interest on tax that is paid late.

The period of suspension can be from one month up to a maximum of two years – it will depend on the facts of each individual case. There is also likely to be a written agreement put in place between the taxpayer and HMRC setting out the conditions to be met, these may include provisions aimed at avoiding careless mistakes in the future.

What happens if taxpayers fail to meet the conditions set?

Should the taxpayer not be able to meet the agreed conditions that have been set, then the suspended penalties become due along with any further penalties that may arise from breaching the conditions themselves such as filing another tax return late.

Can HMRC refuse to suspend penalties?

Yes, any suspension is purely at HMRC’s discretion and this also means that the right to appeal the decision of a given case is limited; a tax tribunal appeal is only permitted if the HMRC decision is ‘flawed’. This can include where HMRC have failed to properly consider a suggested condition or have not given a reason for refusal.

Penalties in the press

HMRC have generated a lot of press interest recently. On the one hand there is an outcry about the plan to increase late filing penalties to £2,000 as part of the new digital tax accounts. And on the other, an equal level of dismay that HMRC are writing of existing late filing penalties too easily (890,000 people missed the Jan 31st deadline).

To conclude….

Suspension of penalties is not suitable in all cases and even where it may be appropriate, it is not certain that HMRC will agree to the suspension of penalties in question. It is however, worth looking into should penalties become due.

Further assistance

Contact Mike or Lynn if you believe that you may be subjected to penalties. They can be very costly so taking professional advice early is important. Email: or call 01280 818776.



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