Chartered Management Accountants and Consultancy Services for Small and Medium Sized Businesses

Protect yourself against HMRC penalties in the event of an enquiry.

We have successfully dealt with a recent client tax enquiry, where the possibility of penalties highlighted the need for tax payers to ensure they protect themselves, against penalties, in the event of tax return errors.

HMRC launched an enquiry, when they discovered that a client’s tax return had a significant error, in relation to employment income. Tax due from the return had been understated by a hefty four-figure sum.

Possible penalties at the lower range of HMRC’s statutory scale, could have been nearly £2,000, and potentially much higher if HMRC had considered any kind of negligence or fraud, to be involved.

With the assistance of the client, we provided significant evidence to prove that a former employer had provided incorrect information to the client, throughout the tax year, and on legal documents.

We argued that no penalties should be placed on the client, as the error was due to the employer, clearly providing wrong information, upon which the client relied, in good faith.

After a number of letters and phone calls, the HMRC Officer, agreed that the error had been beyond the client’s control, and that no penalties would be levied.

So if you are involved in a tax enquiry, where incorrect tax has been declared, follow some basic rules.

- Ensure you have sufficient evidence, (including third party documentation), that the information you submitted in the tax return, was completed, in good faith from documents you received.

- Strongly, advocate that you had taken all reasonable care to complete the tax return correctly, and that you had no reason to believe that information supplied to you was anything other than correct.

- Deal with matters objectively. It is very easy if you are faced with possible financial penalties to allow worry and stress, to affect your judgement. Consider appointing an advisor, who is experienced at dealing with HMRC, and who will deal with the matter, in a professional and objective manner.

Our client offered the following thanks:
“Aldred Consultancy played a key role in getting to this outcome. Their experience and pragmatism ensured we were able to present the facts correctly to demonstrate reasonable care to the HMRC. “


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contact Kenneth or Amanda Aldred here.