A guide to the penalty regime
A new penalty regime is being introduced for accounting periods beginning after March 31 2008 and all returns filed after March 31 2009. These rules provide the Revenue with a new framework to punish inaccurate tax returns. They apply to both individuals and businesses and across the board to income tax, corporation tax, VAT, PAYE and National Insurance.
The penalties will range from 0% to 100% of the tax underpaid as a result of the inaccuracy. The penalty is determined by placing the offence into one of four categories:
- Mistake after reasonable care
- Failure to take reasonable care
- Deliberate understatement
- Deliberate understatement with concealment
For each category there are two penalty ranges. In the case of a voluntary disclosure there is a broad range to enable the Revenue to give a taxpayer credit for owning up to the offence. If the offence has been discovered by the Revenue the range is narrow and the Revenue have less latitude to show any mercy.
The offence is positioned within the set range according to the degree of co-operation provided by the taxpayer. The table below shows the scope the Revenue will have to levy penalties:
This new regime appears to have positive and negative aspects. On the one hand we are told that penalties will not apply to mistakes made if reasonable care has been taken. On the other hand there are draconian penalties for more serious offences. Clearly, it is important for all taxpayers to ensure that their tax affairs are in order so that they are not exposed to the full force of these extensive penalties.
If you would like to discuss your tax planning requirements, please contact Charles Green on 020 7022 0050.
If you would like to discuss your tax planning requirements, please contact Charles Green on 020 7022 0050.
As members of the Hyde Partnership, we can offer clients joined-up fund-raising, M&A, business sale and marketing advice.
We are proud sponsors of Woodmansterne Hyde FC, supporting kids in the local community.