The value of tax penalties reached £851m in 2022/23, up from £681m in 2021/22 according to accountancy group UHY Hacker Young. The firm suggests that penalties are seen as something of an ‘easy win’ for HMRC, given the high levels of outstanding tax debt (estimated to be £37bn in September 2023).
The firm notes that penalties are hitting businesses which are already under financial pressure, having been impacted by the covid downturn, rising interest rates and the threat of recession, while others are being penalised for simple paperwork errors, as David Jones, Tax Director at UHY Ross Brooke, comments: ‘A pattern over recent years has been HMRC’s aggressive view of what constitutes “deliberate behaviour” and their stubbornness around that issue. Of course, once characterised as deliberate behaviour, the penalty tariff rockets and that could be reflected in the high penalty figures. However, the recent case P Gopaul suggests the courts are waking up to this – but you must be prepared to appeal and argue your case.’ (In Gopaul [2023] UKFTT 728 (TC) the tribunal found that HMRC had not satisfied the burden of proof in relation to deliberate behaviour by the taxpayer.)
Noting the importance for individuals and businesses to appeal against penalties which may have been wrongly charged, Sean Glancy, partner at UHY Hacker Young, said: ‘HMRC is often not reasonable in removing penalties for genuine errors – they sometimes seem to operate with a “shoot first, ask questions later” approach. Once a penalty is issued, the process is quite draconian, however about half of penalties are withdrawn on appeal.’
The value of tax penalties reached £851m in 2022/23, up from £681m in 2021/22 according to accountancy group UHY Hacker Young. The firm suggests that penalties are seen as something of an ‘easy win’ for HMRC, given the high levels of outstanding tax debt (estimated to be £37bn in September 2023).
The firm notes that penalties are hitting businesses which are already under financial pressure, having been impacted by the covid downturn, rising interest rates and the threat of recession, while others are being penalised for simple paperwork errors, as David Jones, Tax Director at UHY Ross Brooke, comments: ‘A pattern over recent years has been HMRC’s aggressive view of what constitutes “deliberate behaviour” and their stubbornness around that issue. Of course, once characterised as deliberate behaviour, the penalty tariff rockets and that could be reflected in the high penalty figures. However, the recent case P Gopaul suggests the courts are waking up to this – but you must be prepared to appeal and argue your case.’ (In Gopaul [2023] UKFTT 728 (TC) the tribunal found that HMRC had not satisfied the burden of proof in relation to deliberate behaviour by the taxpayer.)
Noting the importance for individuals and businesses to appeal against penalties which may have been wrongly charged, Sean Glancy, partner at UHY Hacker Young, said: ‘HMRC is often not reasonable in removing penalties for genuine errors – they sometimes seem to operate with a “shoot first, ask questions later” approach. Once a penalty is issued, the process is quite draconian, however about half of penalties are withdrawn on appeal.’
