July 17th, 2013

The age of the penalty

Nobody likes a Government who puts up tax. Correction. Nobody likes a Government who puts up tax….for them. Even in today’s age of austerity it’s still proving to be incredibly difficult to balance the books. Cuts to services are as unpopular as raising tax. The problem for any Government is to appear fiscally competent whilst not being so unpopular that they can’t get re-elected. To what extent the present Government is achieving this balancing act is a matter of personal politics.

What is clear though is that tax penalties are a quick and easy way of raising revenues. Legislation is already in place and there’s little public sympathy for people who get fined for not following the rules.

We deal with HMRC on a daily basis and here’s our view of how things are developing:-

1. Greater levels of compliance are being demanded. For example, the new RTI system imposes an obligation to tell HMRC every time someone is paid. Previously this information was only required annually.
2. The penalties for non-compliance are increasing. For example, filling a late tax return can incur a massive automatic penalty when previously a £100 penalty was the risk.
3. HMRC are levying penalties for mistakes that previously they would have let pass. For example, charging a penalty for carelessness for omitting employed income from a tax return. In the past HMRC would have typically looked for the additional tax and interest on errors where there was clearly no intention to gain.

So, a perfect storm. More rules, higher penalties and a more aggressive stance from HMRC.

Unfortunately for taxpayers we don’t believe anything will change in the near future. And, as the dice is loaded in the favour of HMRC there’s only one realistic choice – do it properly, do it right, do it on time.

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John manages a wide portfolio of owner managed businesses and oversees the smooth operation of the firm’s payroll department.

After obtaining his degree in mathematics from the University of Liverpool, John joined Jonathan Ford & Co in 2004 and qualified as a chartered accountant four years later. John likes to keep abreast of developments in tax and accounting and is responsible for the mentoring of junior staff.

Outside of work, John enjoys powerlifting and is a Liverpool FC season ticket holder.

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