HMRC Penalties and Powers

It’s is always important to be aware of HMRC penalties and powers as these can appear as if by magic, right out of the air. However, HMRC always have had the statutory power to levy penalties on defaulters.

Let’s remind ourselves of some of the penalties which we should avoid.

RTI (Real Time Information)

Late filing penalties for in-year RTI submissions will start from 6 October 2014 (FA2009 s106,Sch 55, paras 6B-6D) with one penalty of £100 per month for a payroll of 1 to 9 employees this can easily mount up.

Late payment or late filing of a tax return

£100 for late submission. (FA2009, S106 sch 55) Get the return in early. More than three months late and the penalty is plus £10 per day for the next 90 days, that’s £900.

Late reply to queries.

This is possibly the easiest to avoid. HMRC write to you enquiring into your company accounts, if you don’t reply and Finance Act 2008 (s113 sch 36 paras 39,40,50) kicks in with a penalty of £300 and a possible continued  failure charge of £60 per day. Just reply even if it’s to ask for more time.

Failure to keep and preserve records

Up to £3,000.(FA1998, Sch 18 para23) If you have a business you need to keep adequate records to prepare accounts. This is not a new penalty, but one HMRC will enforce.

VAT (VATA 1994 ss59-59B, 71)

First default  in the surcharge period of 12 months from the most recent default of submitting a return or not paying on time, no surcharge, second default 2%, third default 5%, fourth default 10%, fifth default 15%. The percentage penalty is on the VAT due, with a minimum of £30 at the 10% and 15% rates. HMRC do not issue a surcharge at the 2% and 5% rates if it is calculated to be less than £400.

Perhaps new powers?

Don’t pay and HMRC will take the money direct from your bank account. This is on the table at the moment being considered by the government.

These are just a few of the penalties and powers that HMRC will raise. Always get professional advice the cost saved by not paying penalties will go towards your accountants fees.

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