HMRC enquiries & investigations - what are the penalties

The tax penalty regime is generally based on the behaviour of the tax payer. There are various factors which will be considered:

• The timing of tax payments;
• The nature of the error;
• Should advice have been sought before taking action?
• What awareness of this issue existed? For example, the quantum of penalties can be affected if the issue was highlighted previously but no action was taken.
• Whether you cooperated with the enquiry and whether you volunteered information or needed to be prompted.

The penalty regime applies to both direct tax (for example income tax and corporation tax returns) and indirect tax (for example VAT) returns. The type and quantum of penalty will take account of the above factors to establish whether errors and omissions were due to:

• Mistake despite reasonable care;
• Failure to take reasonable care (careless);
• Deliberate but not concealed;
• Deliberate with concealment;

The extent of the failure increases the level of penalty. Mistakes despite taking reasonable care are unlikely to give rise to a penalty, whereas deliberate action with concealment attracts a penalty of up to 100% of the tax due, which can be higher in the case of certain offshore non-compliance and / or tax avoidance matters

Other penalties can also be levied, based on:

• Deliberate fraud or tax evasion
• Failing to register for VAT when your company turnover reaches the required tax threshold
• Failure to register a new business
• Not keeping adequate records

How can we help?

We have a wealth of trusted and experienced professionals who can help you navigate an HMRC enquiry with the minimum amount of anxiety. Our team know the stress that can be experienced by a tax-payer during an enquiry and can provide our clients with comfort that their tax affairs are in capable hands.

Contact us