OTS p19 Finance Jul09.qxp 24/06/2009 12:00 Page 19
finance · business building
Be prepared for more
Inspections and penalties
This month Richard Green, tax associate corporation tax there will be a new penalty which will be
at Martin Aitken & Co, chartered due where a deliberate or careless inaccuracy leads to
accountants and business advisors,
overstated tax losses. You can no longer pay less by
explains to us that HM Revenue &
arguing that there was no tax lost to the Exchequer
For those without their own
Customs can now inspect a wider variety
where there was a reduction in losses.
financial adviser Martin
of records and apply harsher penalties for
The new penalties are ‘tax geared’ and based on the
Aitken & Co is available for
mistakes and late returns.
amount of tax understated and rate of penalty
help. Contact Richard
determined by the nature of the behaviour giving rise to
Green, associate, Martin
HM Revenue and Customs completely revised its the understatement.
Aitken & Co on 0141 272
Inspection and Penalty Regime on 5 April this year. This There has been an initial £100 penalty for late filing
0000 or email him at
was in response to a consultation with accountants, of tax returns for some time. There are now possible
rkg@maco.co.uk
businesses and trade organisations. However many daily penalties of £10 per day if you are more than
licensed traders can be forgiven for missing the low-key three months late, and 5% of tax due for prolonged
HMRC announcements of the new system. failures over 6 and 12 months; and even up to 70% of
Most traders will have received a VAT or PAYE the tax in extreme cases. “You don’t have
Inspection in the past. However do not be surprised if For PAYE the amount of the penalty will depend on
to say yes to
the Inspector asks to see more business records the the number of defaults in any 12 month period similar
HMRC’s first
next time he calls round. This new inspection can now to that for late VAT returns. A second late payment and
suggested
cover all taxes at the same time including VAT, PAYE, any subsequent failures will attract a penalty of 2% of
meeting, but do
Income Tax, Corporation Tax, National Insurance, and the tax rising to 5% of tax unpaid.
not put it off as
Capital Gains Tax.
they do now
First contact from the Revenue will probably be a Reduction in Penalties
telephone call proposing a time for the visit. You do not The new system will provide for each penalty to be
have the power
have to say yes to the first suggested time if this is substantially reduced as far as nil where the taxpayer
to do an
inconvenient, but do not put it off. HMRC do now have makes an unprompted disclosure of errors. Where a
unannounced
the power to do an unannounced visit in certain taxpayer discloses fully but only after prompting by
visit in certain
circumstances. The Revenue say that these visits are to HMRC the penalty could be reduced by up to a half. circumstances.”
try and point out any significant tax or book keeping Maximum percentage penalties for prompted
problems during the year when they can still be fixed, disclosures (with the percentage for unprompted
and before they cause a problem in a Tax Enquiry much disclosures in brackets) are now as follows. Innocent
later. Whether pub and restaurant businesses will see it error, having taken adequate care, 0% (0%); failure to
like this is a matter of debate. take adequate care, 15%-30% (0%-30%); deliberate
The other side of this new system is the introduction action resulting in underpayment, 35%-70% (20%-
of new ‘streamlined’ penalties for late filing and late 70%); and deliberate action plus concealment 50%-
payment of tax under both the Self Assessment Income 100%, (30%-100%).
Tax and Corporation Tax systems. For income tax or Each licensed trader must take reasonable care but
what is necessary for each person is viewed in the light
of their abilities. Also late payment penalties will not be
Q
We operate our pub business through a
charged during an agreed time to pay arrangement with
partnership and so we usually pay our income
HMRC (which I explained in my April article) unless the
tax in two instalments in January and July. During
taxpayer defaults or misuses the arrangement.
May we received demands from HMRC for several
The old penalty regime was much less rigid and the
thousand pounds each. This has never happened
Inspector had more scope to settle
before. Why are they chasing me for tax now?
enquiries/investigation after a process of negotiation.
Under the new system the Inspector has less leeway to
A
HMRC say that they are not ‘chasing’ you.
negotiate the penalty.
They are simply reminding you about the 31
As you might expect,
July payments well in advance. Apparently
settlements under the new
taxpayers sometimes appear to believe they can go Martin Aitken Financial Services
system are likely to exceed
off on holiday in July and forget to pay their tax. Ltd is authorised and regulated by
penalties imposed under the
HMRC are sending out statements early this year the Financial Services Authority.
old system. It is very
so everyone knows where The purpose of this article is to
Q
&
A
important that all licensed
they stand and there will provide technical and generic
traders identify errors and flag these
be fewer excuses for late guidance and should not be interpreted as
up to HMRC without delay to
payments. a personal recommendation or advice.
minimise penalties.
www.55north.com · july 2009 · ots · 19 ·
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