Proposed HMRC penalties could catch out landlords

Landlords could face penalties of up to 30% of unpaid tax after making ‘careless’ mistakes in their self-assessment returns, the Daily Telegraph reports.

HMRC is seeking powers to decide whether an error should be treated as deliberate when a taxpayer fails to correct it.

Current rules generally regard an inaccuracy as deliberate only where someone knowingly submitted incorrect information.

Under the proposals, a careless mistake could attract a penalty ranging from 0% to 30% of the tax lost, while deliberate errors could carry penalties of up to 100%.

Tax experts raise concerns

Nimesh Shah, of accountancy firm Blick Rothenberg, told the newspaper: “Most people are not represented by a tax adviser – and so taxpayers may genuinely not know when they have made an error and could find themselves exposed to higher penalties.

“A taxpayer may make an innocent mistake because they don’t understand the rules.”

He added: “My concern here is that HMRC could apply hindsight to assess the taxpayer behaviour.

“This is the difficulty with the subjectivity in these provisions because I could envisage a good argument that she was ‘careless’ because she did not take advice on a complex matter.”

New correction notices

The legislation would place taxpayers under a new obligation to correct mistakes once they become aware of them.

HMRC could also issue a Customer Correction Notice requiring someone to check their tax position.

A taxpayer receiving their first notice within six years would avoid a penalty if they corrected a careless error.

Failure to comply could allow HMRC to treat the mistake as deliberate and issue tax assessments covering up to 20 years.

The technical consultation will remain open until 7 September, although no date has been set for the measures to take effect.

Tackle complex tax cases

HMRC said the policy would improve compliance and release resources for more complex tax avoidance cases.

An HMRC spokesman said: “We know most of our customers act in good faith and want to get their tax right.

“These proposals are designed to help minimise penalties for those who swiftly correct mistakes when we flag them and make the process of doing so quicker and easier.”