October 1, 2007

Changes to Tax Penalties II

Further to the announcement that new Penalties are to be introduced by HMRC for the financial year commencing April 2008 the following are the proposed changes. These are still however, the subject of consultation.


  • Careless error – 30% of potential lost revenue
  • Deliberate error but not concealed – 70% of potential lost revenue
  • Deliberate error and concealed – 100% of potential lost revenue
  • Under Assessment by HMRC – where the taxpayer should have recognised the mistake – 30% of potential lost revenue

Presumably if we are innocent unless proved guilty HMRC will be looking for some sort of evidence of deliberate error and concealment or will they be looking for evidence to prove that we the taxpayer did not make a deliberate error or conceal their mistake as seems to be the case where Customs are looking at large potential revenue gains particularly of VAT.

It has also come to mind that when accountants and consultants such as ourselves review a client’s records we leave ourselves open to criticism or worse if we miss a potential error. This could have the effect of making one more reluctant than ever to certify tax matters without some sort of caveat.

In addition as yet there is no definition of what is meant by ‘concealed’ or ‘deliberate’ error.

We wait to hear – if you want to submit comments to the consultation there is a document of the HMRC website.

Elysian Associates

October 2007

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