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A brief guide to HMRC penalties

To ensure that people comply with the rules and pay the taxes that they owe on time, HMRC issues penalties or fines. Below is a brief overview of the penalty system.

Types of penalties

There are three main groups of penalties. They are: fines for mistakes, lateness, and failure to declare.

Inaccuracy penalties

Any error that is due to carelessness can potentially result in a penalty being issued. The tax office expects everyone to understand their responsibilities and to seek help before filling in their tax form if they do not understand something. If you are still unsure about something after seeking advice, you should note that fact on your tax return.

Late filing or payment penalties

If you send in your tax return or payment late, you will receive a penalty. The later you are, the bigger the penalty. Late payment charges are usually a percentage of the amount that is paid late.

Failure to notify

Not notifying HMRC of income or a capital gain means you will have failed to pay all of the taxes you owe. The penalties for this are high.

You can also end up with this category of penalty if your business grows and becomes liable to pay VAT or corporation tax, and you do not notify the HMRC of this fact.

If the assets or income you fail to declare are held offshore, you will also be issued with an offshore penalty.

The best way to avoid issues is to understand your responsibilities, keep accurate records and seek help from a professional if you are at all unsure about something. It is important to do your accounting tasks on a daily or at least a weekly basis. If you do this, your records will be in order and you will be less likely to make a mistake, be late, or under declare.

Posted by Mark
October 13, 2014

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