HMRC ‘deliberate error’ penalties up by 19%


The number of penalties issued by HMRC to taxpayers for intentionally submitting an erroneous tax return increased by 19% in 2016-17, compared to the previous year.

The penalties for “deliberate errors” reached 34,100 last year, up from 28,700 in 2015-16, according to tax support and insurance provider PfP. The fines were imposed in cases where HMRC believed an accuracy was made intentionally, or if a taxpayer did nothing to correct an error, despite having knowledge of it.

Penalties classed as “deliberate errors” carry a higher fine, and taxpayers risk being “named and shamed” by HMRC, said PfP.

PfP said that the HMRC was under pressure to increase revenue collection by applying higher penalties in a bid to close the tax gap, which rose to £34bn last year. As HMRC is able to monitor the taxpayer’s affairs “more closely”, PfP said that it increases the likelihood of the revenue authority being able to collect additional revenue from the same person.

Kevin Igoe, managing director at PfP, said: “Penalties for ‘deliberate errors’ are the latest weapon to be used by HMRC in its relentless hunt for extra revenue.

“The jump in penalties for deliberate errors coincides with a fall in those imposed for ‘failure to take reasonable care’, which tend to result in a less severe fine.

“It is difficult to reconcile this increase with HMRC’s stated policy that the objective of raising penalties is not to collect extra cash but to encourage good behaviour in the future.”

The number of fines issued by HMRC to finance directors and senior finance executives has increased by 150% over the past five years. The revenue authority is also expected to collect £325m in unpaid tax following a recent ruling by the Upper Tribunal relating to a tax avoidance scheme.

Last week, HMRC had an appeal rejected by the Upper Tribunal in a case relating to the taxation of termination payments made to football player employees of Tottenham Hotspur.

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