HMRC assuming tax return mistakes are deliberate
Completing the self assessment tax return process is one that few people relish, partly due to the fact that paying tax is one of the least enjoyable parts of being self employed, but partly because the tax system is complex and complicated and mistakes can seem inevitable. Most people manage to complete their tax return on time and without any difficulties, pay the correct amount of tax and never incur the wrath of the taxman. But for those who have slightly complicated situations or make an honest mistake, the chances that HM Revenue and Customs (HMRC) will penalise them as though they had deliberately attempted to mislead the department.
The latest figures suggest that HMRC is handing out penalties more frequently and for higher amounts to those who submit inaccurate tax returns. Some experts believe that the department is taking a more hard-line approach to those who have made innocent errors on their tax returns, with many concluding that they are assuming the worst in order to increase HMRC raised from such fines.
In the tax year 2012-13, just over 5,000 taxpayers were issued with penalties for ‘deliberate behaviour’ which includes understating income and other similar transgressions. By the 2013-14 tax year this had rocketed up to nearly 15,000, suggesting that there were significant changes to the way HMRC administered the penalties system. The proportion of the total number of penalties which were applied for ‘deliberate behaviour’ rose from 9 per cent to 16 per cent, suggesting that there had been some shift in the way they decide whether errors are as a result of deliberate attempts to mislead or not.
When HMRC decide whether or not an error on a tax return is derived from an attempt to mislead or an innocent mistake, they penalties applied reflect that. The most severe are those which are for taxpayer has deliberately misled the taxman and also made an attempt to conceal that the information they have provided is incorrect. The level of fine is based on the potential revenue lost by HMRC, which can be up to 100 per cent in the most serious cases but is usually only around 30 per cent for errors which have arisen through carelessness and which the taxpayer has openly admitted.
Whilst there could be some truth in the suggestion that HMRC are imposing more and more severe fines on those who might previously have been given the benefit of the doubt, it is important for self assessors to remember that their tax return is a signed declaration that the information they have provided is correct.
If you are concerned about completing your tax return then we have a range of useful resources to help you do everything right, including our guide to contractor expenses and one which will give you the lowdown on contractor tax.
For many people, the most effective way to ensure that your tax return is completed correctly is to use a qualified accountant with experience and expertise of completing tax returns accurately. For more information on our services, call us today on 01442 275789 or email firstname.lastname@example.org.