A self-employed man who made a small error when filling out a self-assessment form for the first time has been issued a 70 percent fine by HMRC under their new aggressive regime.
The unnamed man who hails from Kent is said to have made an error whilst requesting a tax rebate. He believed that he was owed £3,000 by HMRC however they calculated that he was owed just £1,000 and they subsequently fined him £1,400 for the over-estimation.
HMRC recently inducted new penalty schemes as they crack down on taxpayers. The new rules state that a taxpayer who makes a ‘careless mistake’ can be fined 30 percent and those who are deemed to have made ‘deliberate and concealed’ mistakes can face a fine of up to 100 percent. This incident marks the first time an individual has been given such a fine for making an error on a rebate request.
The man’s plight has been looked at by law firm McGrigors, their director of tax investigations, Phil Berwick said: “Calculating a rebate can be complicated and the taxpayer in question was unrepresented by an adviser, yet HMRC has refused to take any of this into consideration we believe he made an honest mistake, so for HMRC to be fining him is outrageous. HMRC has charged this taxpayer with a higher penalty than someone committing a serious fraud under the old penalty regime.” The man’s fine was worked out by taking 70 percent off the difference between his estimation and HMRCs, which was £2000, leading to the £1,400 charge, Mr Berwick added “This is very worrying if under the new penalty regime, HMRC are going to charge 70 per cent for such mistakes.”
The new harsher measures have been implemented by HMRC as they battle to increase tax revenue which has fallen during the recent recession. Previously HMRC issued a warning to tax dodgers and opened a window of amnesty allowing people who had hidden money away in offshore facilities the chance to come forward and declare to avoid the heavy fines that would have followed where they found out after investigation.
However many people feel that by going after people who simply make small errors HMRC are taking things a step too far, especially honest workers who may falter at the hurdle of confusing self-assessment forms. A member of the TaxPayers’ Alliance said: “HMRC seems to have given up entirely on serving the public and taken to bullying them instead. We have a hugely complex tax system, and no one should be fined for being unable to understand its every technicality. A lot of people are already angry at being overtaxed and, if HMRC tries to deter them from claiming rebates in this way, tempers are going to rise further. The tax system and the tax authorities have ceased to be fit for the purpose.”
When asked HMRC were unable to comment on individual cases yet they did say that people won’t be charged for “making an honest mistake” and that “The fines reflect whether a taxpayer has taken due care and attention, and whether the mistake is deliberate or not, and whether records have been kept correctly.”
Their spokesman also said “It is important that people pay the right amount of tax and reclaim only the amount of tax they are entitled to. Any penalty can be appealed to an independent tribunal.”