8 June 2012    |    Uncategorized

The new penalty regime

In 2008 the Inland Revenue started the principle of “reasonable care” in filing tax returns.

This approach has now been strengthened, formalised and is rigourously applied. The level of penalty depends upon the type of failure; how it comes to light; and some other factors.

But of course, the whole process is very subjective, with care needing to be taken where areas are unclear, unknown or particularly complex. That is to say that not every default will be careless; but the documentation of the steps you took to avoid error will be an important mitigating factor in any claim by the Inspector.

Of course, if an individual genuinely did not know that a tax issue arose – the unknown unknowns, as Donald Rumsfeld put it – then what reasonable steps could he take?

The range of penalties is potentially huge, as the table shows:

Type of defaultHow disclosed?Min penaltyMax penalty
Reasonable caren/aNo penaltyNo penalty
CarelessUnprompted0%30%
Prompted15%30%
DeliberateUnprompted20%70%
Prompted35%70%
Deliberate and concealedUnprompted30%100%
Prompted50%100%

 
It is important to seek early professional advice in these circumstances, and if you have Tax Investigation Insurance you will need to notify your insurer if you intend to make a claim.

Nicolson Accountancy can provide Tax Investigation Insurance cover to our clients at a very reasonable cost – just contact Angus today to discuss your particular circumstances.

Glasgow
31 Lynedoch St.
G3 6EF

Kilmarnock
71 King Street
KA1 1PT

Stornoway
49-50 Bayhead
HS1 2DZ

Website by Haiwyre