As you may recall, last December, the taxman announced that he intended to review 50,000 SMEs annually over the next 4 years with the hope of recovering underpaid tax and the loftier ideal of installing a more prudent approach to record keeping amongst the nations' smaller business enterprises.
The initial briefing was that penalties would be used sparingly and as the Telegraph reported, inspectors were advised not to use their penalty powers unless there was a blatant abuse of the tax regulations. Whether that is still true, is a matter for debate. Recent reports have speculated that HMRC is in fact using the opportunity to issue penalties as a deterrent to the small business sector.
Baker Tilly has recently questioned the ability of HMRC's inspectors stating that they seem to have “little practical accounting experience.” In response a spokesman for HMRC said: “The officers carrying out the current visits are experienced and have received face-to-face training. They will continue to develop their skills as they gain experience,” and added that penalties would only be applied in cases of “serious inadequacy”.
For those who may not be familiar with the penalty regime for records keeping a quick summary of the requirements are here. Failure to comply can lead to penalties of up to £3,000 for each failure to keep or to preserve adequate records in respect of a return or in respect of a claim made other than in a return.
Anyone following this blog will know that there have been some significant changes to HMRC's penalty powers recently and all in all it can be quite confusing trying to keep track. Saving any major tax development, we're going to bring you an overview of the main income tax penalties.