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HMRC fines for ‘careless’ errors up 70% but half are dismissed

HM Revenue & Customs (HMRC) penalties against taxpayers who have made ‘careless’ errors on their tax returns have soared by nearly 70% although half of these are dismissed on appeal, according to latest figures obtained by international tax advisory firm RSM.

HMRC fines for ‘careless’ errors up 70% but half are dismissed


In the year to 2016, the taxman imposed 142,775 penalties for inaccuracies resulting from a failure to take reasonable care, up 66% from the 85,583 fines doled out in 2014/15, show the figures released to RSM via a Freedom of Information request.

“This rise in penalties reflects an increasing willingness within HMRC to challenge taxpayers who file inaccurate returns” said Mike Down, head of tax investigations at RSM.

Half suspended

However, the tax office figures show that an increasing proportion of these ‘careless’ penalties are being suspended when appeal by taxpayers.

In 2015/16, more that half of ‘careless’ penalties were quashed, up from a third in the previous year.  

Down explains that it is possible for taxpayers who incur such penalties to ask for conditions to be set which will “demonstrate to HMRC a likely change of behaviour to ensure future returns are accurate”. 

In such circumstances, the penalty can be suspended for a period of up to two years.

HMRC criticism

Down said that the increase in suspended penalties is likely to be as a result of criticism levelled at HMRC by the First Tier Tribunal, the UK court which hears all appeals on tax-related issues.

“Recent judgments have directed HMRC to offer suspension more readily to errant taxpayers. Assuming that HMRC follows the Tribunal’s line of thought, we should see even more penalties being suspended over the coming year,” he said.

Down added that the appeals procedure “doesn’t go far enough”, arguing that all careless error fines should be scrapped.

“In our view, all ‘careless’ penalties should be suspended unless there is a genuine reason to think that the taxpayer is either unwilling or incapable or changing their behaviour,” he said.

Last week, another RSM Freedom of Information request revealed that HMRC fines against taxpayers who have deliberately understated their income are up nearly 40% – another sign that the tax authority is taking a much harder line on “mistakes” made on tax returns.



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