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New Penalties from April 2009
Newsletter issue - March 09.
The Taxman is getting tougher on taxpayers, businesses and employers, who make mistakes on tax returns, VAT returns and other forms such as P11Ds, and PAYE end of year returns which must be submitted to HMRC. From April 2009 there is a new system of penalties, which will be calculated as a percentage of the potential lost revenue that arises from the mistake.
Say you forget to include a company car on a form P11D. The tax due from the employee for the year could be £2,300, with NIC class 1A payable by the employer of £736, which would make the potential lost revenue from that one mistake: £3,036 (£2,300 + £736).
A penalty for this mistake can be imposed by the Tax Inspector according to your behaviour when you made the error. You and the Inspector will need to agree whether you:
- Made the mistake in spite of taking reasonable care: no penalty;
- Failed to take reasonable care: up to 30% of the potential lost revenue;
- Deliberately made the error: 20% to 70% of the potential lost revenue;
- Deliberately made the error and attempted to concealed the error: 30% to 100% of the potential lost revenue.
As you can see there is still some scope for negotiation with the Inspector regarding the level of penalties for errors and mistakes. However, there will be less room for negotiation than under the present penalty system. The amount of penalty will depend on whether you were prompted or unprompted by the Taxman to disclose the error and on various quality factors relating to the disclosure. If the mistake occurred because you failed to take reasonable care, the Inspector may suspend the penalty if you agree to improve your systems so that the mistake is unlikely to happen again.
One point worth considering is that if you take reasonable care there can be no penalty. It may therefore be worthwhile reviewing your book-keeping systems with us to ensure you have a system that may lead the inspector more towards the opinion that any error did not come because you failed to take reasonable care over your book-keeping!
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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