Summer 2009 Newsletter Content Pot and kettle No more stealth Pensions hit A place in the sun Ready or not... Nice motor Making allowances Good times, bad times Tax-free checkup Three square meals Funny question Dividend rules OK? Too good to be true? Pay my friend Early EIS Mind the halfpennies Just the ticket Flat rate changes Foreign Service This year, next year Partial exemption Penalties Compliance checks Under their eye Howzat? Know your rights Discipline Don't be mean Redundancy Two sorts of absence Warranties

Penalties From April 2009 HMR&C have a new set of penalties for people who make errors in returns. There is a new language to get used to: 30% for "careless" mistakes, 70% for "deliberate but not concealed" errors, and 100% for "deliberate and concealed" errors - what used to be called dishonest conduct. The penalties for direct taxes - income tax, corporation tax and CGT - used to be 100% for negligence or dishonesty, which would then be mitigated to a smaller figure for the seriousness of the offence and other factors, so the end result may be similar. The penalty for careless VAT errors has potentially doubled - the old rate was only 15%. The good news is that an error that isn't careless doesn't get penalised at all. If the tax return is wrong, the average taxman may say that's got to be careless - but you might have followed a court decision that was later overruled on appeal, or you took a reasonable line on the basis of professional advice and later decided to revise it. If you make any sort of error, there is the opportunity to mitigate the penalties by disclosing the mistake to HMR&C so it can be corrected. A full, unprompted disclosure should remove the 30% penalty completely. Failing to deal with something that you know about may move a careless error into one of the higher categories. Some people are worried that HMR&C will use these new penalties to extract more money than before from long-suffering taxpayers. Until we have some experience of how they operate the new system, we won't know. In the meantime, it's important to take care - and to take steps to correct any errors that you find. If you want advice on how to steer clear of penalties, or if you are worried that HMR&C might levy one on you, we are here to help.