HMRC is ‘His Majesty’s Revenue and Customs’, the authorised body in the UK that manages tax payments, collections, and compliance. In the UK, taxpayers must be compliant with the HMRC to avoid tax penalties.
The most common HMRC penalties are discussed below. See how you can manage and avoid these charges.
Types of HMRC Penalties
1. Late Filing Penalties
The most common and frequent penalty occurs due to late filing. Self-Assessment and Corporation tax both have deadlines, and if you miss the deadline, you are penalised for it.
As for the Self-Assessment, the deadline is 31st January. If you do not file the return, you are fined £100 initially. This amount exceeds after 3 months, and £10 is added to your bill daily. The penalties become even greater at 6 to 12 months, with up to 100% of the tax due.
On the contrary, the corporate tax works differently. Companies are charged £100 a day if they get late. The fines are raised at 3, 6, and 12 months, with repeat offenders paying up to £500.
2. Late Payment Penalties
Late payment penalties can occur if you delay the payment and the deadline is missed, even if you have already submitted your return. Paying late can also be costly and penalise the due tax payment. In the case of Self-Assessment, a 5% penalty is charged on unpaid tax after 30 days. Additionally, a 5% is added at 6 months, and again at 12 months.
Moreover, HMRC charges interest on late payments, which is 8.25%. This can significantly impact the bill; however, you can contact HMRC to settle the payment plan too.
3. Inaccuracy Penalties
Inaccuracy in your tax returns allows HMRC to penalise you if any errors are detected. The fine depends on your attitude and behaviour. If your tax returns possess careless mistakes, your fine can range between 0%-30% of the unpaid tax. In the other case, if your filing has deliberate errors that are not concealed, you have to pay 20%-70% of the amount.
On the other hand, any concealed errors detected can charge 30%–100%. However, the penalties can be reduced if you inform HMRC about the errors before they assess.
4. Failure to Notify Penalties
A few basics everyone should inform the HMRC about to avoid tax penalties. If you start a new business, earn additional taxable income, or make gains from a tax liability. You have to pay tax penalties and charges for not informing about any of these. Failure to notify and deliberately concealing exposes you to higher fines.
5. VAT and Capital Gains Tax (CGT) Penalties
Business and property owners must be active and updated with the regulations and additional rules. As per the rules, late VAT registration can be penalised. Around 5% – 15% of the VAT due is charged as a fine. Since late VAT returns and payments fall under the general late-filing and late-payment regimes.
Capital Gains Tax is also penalised if the asset sold is not reported and paid within 60 days. The fine starts from £100, which escalates at 6 and 12 months.
HMRC Appeal
In case of any reasonable excuse, you can appeal the HMRC tax penalty. The reasons can vary from serious illness to IT failure, or bereavement. Typically, the HMRC policy grants 30 days to the taxpayer from the date of the penalty notice to appeal, reduction or review. Recent reports show that up to 73% of penalties are reduced and overturned after appeal. This proves you always have a chance to question an unfair fine.
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Conclusion
To conclude, HMRC penalties can be overwhelming, but you can easily steer them with the right accountancy help. Working with skilled professionals ensures you are always on time with your payments and taxes. Overdue deadlines, late payments, or incorrect tax returns can be irritating, but your Accountant can save you. Keep updated records to always request HMRC support for tax penalty reduction. Stay stress-free yet penalty-free!
