Take heed fellow taxpayers, those of you who are late filing returns or paying your tax demands may well face draconian tax-geared penalties under recent proposals put forward by HMRC.
The penalties for late filing might start after six months, potentially rising to 100% of the tax bill after a year in cases where taxpayers had deliberately failed to file returns.
Needless to say, these proposal have not gone down well with those who deal with HMRC on a daily basis. John Whiting of PwC said that he objected "very strongly" to tax-based penalties for late returns.
Aha, you see dear readers there is an additional charge..taxpayers will also be charged interest based on the amount of tax due.
A double whammy!
Why so greedy HMRC?
As I have said before the government is broke, it desperately needs as much extra revenue as possible to fund its ill thought out spending programmes and pay for its out of control consultancy fees.
On top of the fines mentioned above for late returns, taxpayers also face penalties for late payment that could rise to 10-30% of the unpaid tax after a year.
Roy Maugham of UHY Hacker Young called the proposed "draconian".
Chas Roy-Chowdhury of the Association of Chartered Certified Accountants also noted that HMRC is applying one rule for itself, but another for the taxpayer. He said the "huge disparity" in interest rates charged on overdue tax and paid to taxpayers owed repayments was unjustified.
"When taxpayers make a mistake they are penalised. There needs to be an understanding that when [the Revenue] makes a mistake they are equally penalised."
HMRC claim that the differential is needed to discourage taxpayers from depositing money with the Revenue, in order to obtain a higher rate of return than was available commercially. Nice idea, but the rate discrepancy doesn't have to be so much to do that.
Why not simply charge and offer the same interest rate (eg LIBOR plus 1%) for late returns and overpayments?
HMRC are trying to have their cake and eat it.
Tax does have to be taxing.
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