YouTube teaching us about tax

On the 3rd May 2011, the HM Revenue & Customs (HMRC) have produced a video on You Tube titled ‘Learning Together: Penalties for inaccuracies in documents and returns’.

Has this got you thinking?

The HMRC have created this video to explain the changes to the penalties system brought into force by the Finance Acts of 2007 and 2008. It explains changes in legislation and explains how penalties will be applied for inaccuracies in information, documents and returns supplied to HMRC.

It shows how the quality of the disclosure of any inaccuracies can reduce these penalties and discusses how the penalty calculation is created. It also gives advice on the suspension of a penalty and grounds for appeal.

Penalties Legislation

This legislation was first introduced in the Finance Act of 2007. Under Section 97 and Schedule 24 of this act, penalties were brought into force for inaccuracies in returns and other documents. The act also allowed for penalties for failure to notify HMRC of any inaccuracy resulting in the inaccurate assessment of tax liability.

Penalties are based on the amount of tax understated, under-assessed, over-claimed or over-repaid.

Act 2007 Penalties apply to: Income Tax, Capital Gains Tax, Corporation Tax, PAYE, NI (except Class 1A), CIS and VAT.

Act 2008 Schedule 40 FA08 came into action from 1 April 2010, and brought many of the remaining taxes and duties into the Schedule 24 provisions. The conditions of this legislation came into effect for return periods starting on or after 1 April 2009 and where the filing date is on or after 1 April 2010.

Act 2008 includes: Environmental Taxes (aggregates levy, climate change levy, landfill tax), Excise Duties (alcohols, tobacco, oils, gambling, holding and movements and air passenger duty), Inheritance Tax, Insurance Premium Tax, Pension Schemes, Petroleum Revenue Tax, Stamp Duties and Class 1 A NIC.

Penalties can also be assessed on third parties

If any of your customers have to rely on information provided by another person and the information given was deliberately false or withheld then, that third party may be charged a penalty for any resulting inaccuracy.

However, it is unlikely that a tax agent or adviser would be liable to this type of penalty.  A tax adviser normally receives information from a person and then gives advice based on that information.

So let us ask these two questions to ourselves

  • What do all these changes in legislation mean?
  • Why this new legislation has been introduced?

HMRC is responsible for ensuring everyone pays the right tax at the right time, and the penalties regime is designed to encourage this. It promotes compliance and positive customer behaviour, and fines those who intentionally evade tax.

The ‘Penalties Regime’ objectives are as follows:

  • Taking care with your tax records – taxpayers take reasonable care with their tax records and systems and an inaccuracy happens no penalty will be due.
  • Disclosing inaccuracies or problems without being prompted – If a customer tells HMRC, without being prompted, when inaccuracies do occur, then either no penalty or a smaller penalty will be charged.
  • Helping HMRC put things right;   and how to counteract future errors – If you work with HMRC, and they can see you are correcting things, the HMRC may suspend the penalty and once all sorted out  may cancel all of the penalties.

Take a look at the video on youtube, and if you still need some help avoiding penalties and making sure you are paying the right tax at the right time… Just ask ‘sara saylavy’!