HMRC Penalties – What You Can Do

11th July 2024

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Facing an HMRC penalty? Don’t panic! Understanding how your behaviour influences the penalty amount can help you minimize the impact.

HMRC penalties can be a stressful surprise for any taxpayer. Understanding how they work can make a big difference. This guide will explain how your behavior towards HMRC can significantly impact the size of a potential penalty. By following some key steps, you can minimize the financial burden and ensure a smoother resolution with HMRC.

Fixed vs. Tax-Geared Penalties:

  • Fixed penalties: These are a set amount for each tax year with an irregularity.
  • Tax-geared penalties: These are a percentage of the tax owed, calculated based on the severity of the issue, not how often it happened.

Negotiating Penalties? Not Exactly.

HMRC considers your taxpayer behavior. Here’s how it impacts your penalty:

  • Unprompted Disclosure: Coming clean first results in the lowest penalty.
  • Prompted Disclosure: Disclosing after being contacted by HMRC starts with a higher penalty.

What HMRC Looks For:

  • A positive shift from non-compliance to compliance.
  • Cooperation: The more cooperative you are, the lower the penalty might be.

The Bottom Line:

  • Your behavior sets the range of potential penalties.
  • Helping, telling, and giving evidence can significantly lower the penalty.

 Types of Taxpayer Behaviour and Penalties:

BehaviourUnprompted DisclosurePrompted Disclosure
Reasonable CareNo penaltyNo penalty
Deliberate & Concealed30-100%50-100%

Avoiding Trouble:

  • Aim for “careless” at worst: This is far better than deliberate or concealed actions.
  • Concealing income can lead to prosecution on top of penalties.

Minimizing Penalty Costs:

  • Accepting “careless” behaviour may open avenues to reduce the overall cost of the investigation.

Need Help?

Contact us to discuss your situation and explore options for minimizing your penalty.

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