HM Revenue and Customs (HMRC) have actively sought to clamp down on tax evasion or avoidance and increasingly more individuals and businesses are subject to HMRC tax penalties. It is vital that any taxpayer (individuals and businesses) deal with tax issues as soon as they occur to prevent their appeal from being time-barred and to minimise the accrual of penalty fees such as the late return on self-assessment, late payment of VAT and penalties for failure to notify.
We have a proven track record of successfully contesting disputed tax assessments and penalties with HMRC.
What penalties can HMRC issue?
HMRC issue penalties for late filing of returns and paperwork or late payment can be applied to any of these types of taxes:
- Self Assessment Tax Return deadlines and penalties;
- PAYE/National Insurance payments and deadlines;
- PAYE late payment penalties;
- Missed VAT deadlines- penalties and surcharges;
- Late returns and late return penalties under CIS; and
- Corporation Tax penalties.
What are Civil Evasion Penalties?
These penalties result when HM Revenue & Customs investigate a potential smuggling offence by a traveller or a trader; or fraudulent declarations and dishonest claims for repayment of duty or relief from duty under their civil evasion penalty procedure.
The investigation is conducted with a view to the imposition of a civil evasion penalty for dishonest conduct, if HMRC suspicions are confirmed. It is not being conducted with a view to your prosecution for evasion of customs taxes or duties.
These provisions apply to individual travellers, commercial importers and exporters or their agent or representative.
What are the penalties for errors on returns, payments, paperwork and inaccuracy?
Penalties can be charged if there are errors on returns or other documents which understate the tax or misrepresent the tax liability. Penalties may also apply if you do not tell HMRC if an assessment is too low. This type of penalty is known as an ‘inaccuracy penalty’.
What tax is subject to inaccuracy penalties?
From 1 April 2010, this inaccuracy penalty applies to the following taxes and duties:
- Betting and Gaming duties;
- Capital Gains Tax;
- the Construction Industry Scheme;
- Corporation Tax;
- Environmental taxes;
- Excise Duties;
- Income Tax;
- Inheritance Tax;
- Insurance Premium Tax;
- National Insurance contributions;
- Petroleum Revenue Tax;
- Stamp Duties; and
What document mistakes can you be penalised by HMRC for?
If documents are sent to HMRC that contain a mistake, HMRC will charge a penalty if the error is:
- because of a lack of ‘reasonable care’;
- deliberate- such as intentionally sending incorrect information; and
- deliberate and concealed- for example, intentionally sending incorrect information and taking steps to hide the error.
The level of the penalty is linked to the reason why the error occurred. The more serious the reason, the higher the maximum penalty can be.
Will HMRC penalise if you fail to notify them of changes?
If you don’t tell HMRC when changes happen that affect their liability to tax, VAT, or other duties, you may face a penalty. This is known as a ‘failure to notify’ penalty.
A penalty may occur, for example if your client doesn’t tell HMRC, at the right time, that:
- they are liable to tax because their new business has made a profit;
- their company is liable for Corporation Tax;
- their business turnover has reached the VAT registration threshold;
- they sell an asset and make a capital gain on which tax should be paid;
- they start a type of business that must register with HMRC- for example a business that will charge Excise Duty; or
- their circumstances change in a way that affects their tax position.
This penalty is calculated in a similar way to the inaccuracy penalty- see the section above for more information. HMRC can also reduce it if your client tells them about the failure.
Will the penalty be higher for offshore tax matters?
From 6 April 2011 HMRC can charge an increased penalty where an inaccuracy penalty, or a failure to notify penalty, arises and the income or asset that gives rise to the penalty is held outside of the UK. The penalty for failing to submit a return for 12 months can also be increased where offshore assets or income are involved. The level of the penalty depends on how readily the foreign jurisdiction shares information with the UK and only applies to Income Tax and Capital Gains Tax.
What is VAT and Excise wrongdoing penalty?
From 1 April 2010 HMRC will charge a penalty known as a wrongdoing penalty if you:
- issue an invoice that includes VAT which they are not entitled to charge;
- handle goods on which Excise Duty has not been paid or deferred;
- use a product in a way that means more Excise Duty should have been paid; and/or
- supply a product at a lower rate of Excise Duty knowing that it will be used in a way that means a higher rate of Excise Duty should be paid.
This penalty applies to anyone registered for VAT or Excise, anyone who should be registered to pay VAT or Excise Duty and to other members of the general public.
This penalty is calculated in a similar way to the inaccuracy penalty. HMRC can also reduce it if you tell them about the wrongdoing.
Instruct us to appeal a HMRC tax penalty
We provide advice and representation on the strategic ways to appeal a penalty or penalties received from HMRC. Indeed, we have first hand experience on the internal workings at HMRC and how best to challenge penalties (either through negotiation and settlement with HMRC or through litigation at the First Tier Tax Tribunal).
How we can help:
- Appeals against a tax assessment;
- Appeals against any tax penalty including VAT assessments;
- misdirection and other penalty appeals;
- responding to accelerated payment notices and follower notices
- negotiating with HMRC;
- navigating the HMRC internal review process;
- advising clients on statutory tax appeals at the Tax Tribunal; and
- Judicial Review of HMRC decisions.
Discounted Fixed fee initial consultation
If you need HMRC penalty appeal advice we are able to assist. We invite you to contact us so we can assess your claim. We can subsequently provide urgent help, advice or representation to clients from our expert legal team of leading Tax Appeals solicitors and barristers. Just call or email us now for a heavily discounted initial consultation; our legal team are waiting to help.
Expert HMRC Tax Appeals Lawyers
If you need HMRC Tax Disputes advice, we are available to aid you at every stage of the HMRC appeals process. Members of our legal team have first-hand experience and working knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations, throughout the HMRC internal review process and in front of the Tax Tribunal. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect including developing a strategy.
We are experts in adeptly presenting evidence and employing bespoke arguments combining the facts of your case, previous cases and current legislation to ensure your appeal is a successful one. We provide urgent advice and representation to clients from our unique expert team of established tax and duties specialist solicitors and barristers with a proven track record of delivering authoritative results.
Optimal Legal Results.
Our litigators deliver advanced legal strategies.
We analyse and work out the legal merits of running your case to trial. We calculate and advise on legal risk factors and the litigation rules in England & Wales. We factor in your risk-appetite, costs sensitivity and determination. Together, we plan the best possible result.
You’ll receive strategic legal advice at your first meeting.