HMRC Penalties

 

Failure to notify chargeability (Not telling HMRC that you are trading) 

 

The penalty is charged as a % of the amount of the Corporation Tax which is unpaid 12 months after the the end of the accounting period as a result of the failure to notify. (FA 2008 Sch 41 para 7(3) 

 

The penalty varies depending on how the taxpayer acts and whether they make a voluntary disclosure or are prompted by HMRC, i.e. a nudge letter or investigation 

 

Maximum Minimum Minimum 

Penalty Unprompted Prompted 

Deliberate and concealed 100% 30% 50% 

Deliberate but not concealed 70% 20% 35% 

Any other case 30% 0 – 10% 10% - 20% 

 

The penalty can be avoided is there is a reasonable excuse or can be reduced if special circumstances apply. (in practice this is hard to do) 

 

 

Immediate £100 where the return is filed late: plus 

 

Potential £10 per day for up to 90 days: plus 

 

Penalty of 5% of the tax or £300 which ever is greater if less than 6 months late 

 

 

A penalty of £3,000 per accounting period where there has been a failure to keep records for 6 years from the end of the accounting period. 

 

Failing to provide documents for the purpose of an enquiry is £300 and if the failure continues penalties of up to £60 per day may be imposed. 

 

 

The penalties are a % of the lost revenue: 

Behaviour Maximum Minimum Minimum 

Penalties Unprompted Prompted 

Deliberate & concealed 100% 30% 50% 

Deliberate not concealed 70% 20% 35% 

Careless 30% 0% 15% 

 

Penalties for careless errors may by suspended for two years. 

 

 

5% is charged in respect of each of the following: 

 

Tax outstanding after the filing date 

 

Tax outstanding more than 3 months after the filing date 

 

Tax outstanding more than 9 months after the filing date 

 

 

As with all penalties, they are payable within 30 days of the assessment being raised and interest will be charged on this and the outstanding balance. 

 

 

Talk to an accountant and get them to notify HMRC, preferably before you start to trade. 

 

Keep good records and keep then safe and secure for 6 years after the end of the accounting period. 

Check your records are accurate. 

 

Pay any tax due within the time limit, as we see above the penalty can rise to 15% plus interest. 

 

If there are cashflow issues speak up early and make sure HMRC are notified to avoid the above penalty. 

 

That is why it is essential to prepare the accounts and tax return soon after the end of the accounting period and not delay until the last minute. 

 

All the above penalties can easily be avoided with a little planning and care.