Taxman gets tougher…..

A story reported recently in the national press is a clear example of the new tough line HM Revenue & Customs are adopting.

A self-employed individual without an accountant calculated that he had overpaid £3,000 in tax for the year ending 5 April 2009 and made a repayment claim.  After review, HMRC calculated that the refund due was actually only £1,000.  They then issued a penalty notice to the individual charging him 70% of the difference, a penalty of £1,400!

HMRC have claimed that there is no difference between their old penalty regime and the new one introduced last year, in that penalties can range from 0% of the tax involved for wholly innocent errors, up to 100% for deliberate and concealed actions to reduce the tax payable.  In theory this is correct but the HMRC claims are disingenuous.  The author of this article is an ex HM Inspector of Tax and from experience, only a few years ago a penalty in excess of 50% was rare indeed and usually involved large sums of tax and deliberate actions on the part of the taxpayer.  Now HMRC internal guidelines talk of penalties of up to 30% for ‘careless mistakes’, regardless of the amounts involved.

Of course, we cannot know exactly what transpired in the case being reported in the paper and it is possible to appeal against any penalty issued (the individual has appealed and is now being represented on a no-fee basis by an outraged local law firm) but it is clear now more than ever that professional advice will be needed by anyone who has dealings with the taxman.

Is the Taxman out to get you?  It would seem so….

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