Penalties for Incorrect Tax

The aim of every tax inspector in every tax enquiry is to get you to pay more tax than you declared.  Then they also want to charge you  a "tax-geared" penalty.  That can be up to 100% of the extra tax.   Where the evaded tax is linked to an offshore bank account or asset the penalty can be more than 300% of the tax!

Onshore Penalties in General
Tax officers will charge penalties on extra tax due, as a result of their tax investigation if they believe an error occurred as a result of "Careless" or "Deliberate" behaviour. 

  • The penalties ranges from a maximum to a minimum.
  • The maximum (equal to 100% of the additional tax due) can be reduced - dependent on the "Quality" of any "Disclosure" made.
  • Voluntary Disclosures get lower penalties.
  • If the tax relates to irregularities that started over 3 years before any disclosure the minimum penalty is restricted by 10%.
  • Top quality Disclosures get the minimum penalties available.
  • If Her Majesty's Revenue and Customs believe the error was Deliberate and no voluntary disclosure was made the penalty range is equal to a minimum of 35% (and more usually 45%), with a maximum of 70%, of the additional tax. 
  • Serious tax fraud can have a penalty range of 50% (and more usually 60%) to 100% of the extra tax.
  • Penalties for Careless errors range from nil to 30%.
  • As the extra tax is being paid late, late-payment interest is also charged.  The rate varies from time to time - as it is set at 2.5% above the Bank of England base rate.

Offshore Matters Penalties
Cases with overseas links, such as an overseas bank account, are known as Offshore Matters.  Such cases face harsher penalties than onshore only cases.   More information about the penalty regime where extra tax is due and there is an overseas link can be found on our page dealing with Penalties for Offshore Matters.

Extra Sanctions in Deliberate Error Cases
The Tax Inspectors also have a few additional and worrying punishments in their armoury for use in Deliberate Error cases.

  • Where a penalty is chargeable on a company for a deliberate error, and that inaccuracy is attributable to an officer of the company, then the penalty (which may be 100%) can be transferred to the company officer - a term which includes:  a director;  a shadow director;  a manager; and a company secretary.
  • Also in the case of deliberate fraud, where over £25,000 is due to HMRC and the taxman is not happy with the level of co-operation and disclosure, taxpayers can face "naming and shaming".  HMRC can publish details of the taxpayer: including information about name, address and the amount of tax evaded.  This Tax Offenders register will remain public for a year, and HMRC will actively encourage local papers to print stories.  This can have a very adverse affect on suppliers and credit ratings. 
  • HMRC also have their own version of tagging.  Its "Managing Serious Defaulters" programme means that anyone caught fiddling their tax could face intrusive follow up scrutiny - for the next 5 years, after the initial tax investigation has ended.

No Penalties Charged or Penalties Suspended
On a more positive note: if the Tax Inspectors can be persuaded that the under-declarations were the result of innocent errors then no penalties will be charged.  Or, if they accept that the irrregularities were not deliberate, but caused by failure to take sufficient care, then the penalties can sometimes be suspended or, in unprompted disclosure cases,  reduced to nil.

How can Lynam Tax Enquiry Experts help me get a lower penalty?
Lynam Tax specialists are experts in tax penalty negotiations. We have over 90 years' of experience in negotiating tax penalty levels, and can use our expertise to substantially reduce, and sometimes eliminate, the penalties that the tax inspector is demanding. We have helped hundreds of taxpayers achieve substantially lower penalties than those first sought by the taxman; including zero penalties in many cases.  

PAUL LYNAM: 0845 643 9997
ANDREW NUTBROWN: 0771 877 8710

NB. If you, or your client, are facing tax geared penalties Lynam Tax Enquiry Experts can help.  The earlier in a tax investigation or dispute you involve us the more we can potentially save you: in tax, interest, penalties - and general grief and hassle.


Lynam Tax Enquiry Experts HELP ME?

We specialise in managing all Tax Enquiry, Tax Disclosures & Tax Disputes with HMRC.

We will help you throughout the Tax Investigation or Disclosure and save you money, so you can concentrate on running your business and enjoying your private life.

For a helpful, sympathetic, confidential and no obligation discussion:

For a helpful, no obligation, wholly confidential discussion:

Call Andrew NOW: 07718 778710

I was extremely stressed after receiving a letter from HMRC regarding a WDF.  Especially after two failed attempts with other accountants to help sort this out.   I would definitely recommend Lynam Tax to anyone needing tax problems to be resolved.

Mrs Lawson, Buckinghamshire, 30 July 2022.

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