Has HMRC changed its penalty policy? - Thorne Widgery

HM Revenue & Customs (HMRC) is facing calls to clarify its penalty policy ahead of the upcoming self-assessment tax return deadline of 31 January.

The calls come after HMRC amended its penalty factsheets in December, much to the confusion of visitors to the tax authority’s website.

New wording on its factsheets suggests that taxpayers who ‘voluntarily disclose’ that they have made an error in their tax return could potentially incur a 10 per cent penalty.

Previously, such disclosures would not attract a penalty of any kind.

However, the new wording appears to suggest that anyone who takes “a significant period” to spot an error on their return – and to inform HMRC of this error – will be handed a penalty.

The Revenue’s new, amended factsheet reads: “If you have taken a significant period (normally three years) to correct or disclose the inaccuracy we will normally restrict the amount of reduction given for disclosure.

“We will restrict the penalty range by 10 percentage points above the minimum to reflect the time taken before working out the reductions for telling, helping and giving,” it adds.

Reports suggest that HMRC has not been very clear in communicating the change – and concerns have been raised that the new wording may encourage individuals to avoid making disclosures.

As a result of this, tax bodies and professionals are calling on the Revenue to clarify why the change has been made – and whether such penalties will still apply in instances where a taxpayer has taken “reasonable care” with their return, yet still made an error.

HMRC has been urged to provide comment, but at this stage, none has been given.

In the meantime, taxpayers are being urged to be on high-alert when completing their tax returns and to ensure that all crucial information is checked and verified by an accountant.