HMRC penalty payments increase

HMRC penalties for taxpayers’ compliance failings are on the rise again, following a sharp drop at the start of lockdown, according to research by UHY Hacker Young.

The firm says HMRC collected £34m in September, an increase of 62% from a low of £21m collected in May.

HMRC suspended tax investigations at the start of the pandemic as it shifted many of its investigations staff into helping taxpayers with emergency coronavirus assistance.  This resulted in a slump in penalties being imposed on taxpayers for underpayment or late payment of taxes.

Due to the reduction in HMRC’s normal investigation work, UHY Hacker Young says the total amount received in penalties fell 36% from £730m to £468m in the year to 30th September.

However, the firm forecasts further increases in penalties as HMRC shifts more of its staff back to compliance work and steps up investigations into the misuse of the government’s support schemes, such as the furlough scheme, during the pandemic.

Sean Glancy, partner at UHY Hacker Young, said: ‘The lull in HMRC investigations is largely over. Many accountancy firms are already reporting an increase in HMRC enquiries so if you do have tax that you have avoided or evaded then now is the time to come forward.’

The amnesty for businesses who had over claimed furlough payments ended on the 20th October and HMRC have so far identified 27,000 high risk cases. This number is only going to increase over time.

Glancy said: ‘Businesses that have not come forward under the furlough amnesty should be braced for HMRC to impose the highest penalties that it can. This is exactly the kind of area that HMRC will deliberately impose tough penalties to create a deterrent effect.’

Penalties can rise to as much of 100% of the amount of tax HMRC believes it is owed, depending on whether mistakes resulted from careless or deliberate behaviour by taxpayers.

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