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Tax Compliance

More and more people are finding themselves within the throes of the self-assessment regime which is controlled by HM Revenue & Customs (HMRC).   Tax legislation has more than doubled over the last ten years, but it is daunting that it still remains a taxpayers’ responsibility to ensure that they make correct returns, an increasingly difficult task with the numerous ‘grey areas’.

The penalty regime has significantly changed over the last few years and HMRC are now able to apply fixed penalties to taxpayers for making mistakes. Regardless of whether a tax payer has a tax adviser – if a tax return includes an error where the taxpayer should have known better a penalty of 30% can be levied on the tax underpaid – and we expect that they will! (a penalty will still arise if losses have been made)

In addition to these penalties for minor errors, there are much more serious charges if items have failed to be disclosed to HMRC, up to 70% applies here, or for deliberate concealment the penalties can be as high as 100%.

Another aspect that HMRC are paying more attention to is the raising of Discovery Assessments. HMRC can raise a Discovery Assessment (regardless if the time period for enquiry has passed) where they believe that they were not provided with the necessary facts to assess a tax return.

What this means is that in certain scenarios they are expecting to see additional information to explain certain entries.

A classic example of this was highlighted in a tax case “Langham v Veltema”, here the taxpayer had included entries on his tax return which were based on a valuation. HMRC became aware that there was something unusual about the basis of the valuation and so they wished to refer the case to the District Valuer. The taxpayer contended that HMRC were out of time but HMRC were successful in the courts because the tax return had contained insufficient explanation of the basis of the valuation.  Therefore, it is important that HMRC are given all the information to enable them to make a fully informed decision to give individuals peace of mind that there can be no come back after the statutory time limits.

With all this in mind it is more important than ever to make sure that you are getting sound tax advice. Tax compliance used to be about filling in the correct boxes on a return, it is much more than that now. It is important that additional disclosures are made, where applicable, to avoid scrutiny from HMRC. Our experienced team, including ex Revenue employees, seek to minimise the risk for you so you don’t have to worry or waste time with enquiries.

If you would like any assistance with your tax compliance please email or telephone 01242 776000 and we will contact you to discuss your requirements.