New Penalty Regime – Be Prepared and Be Proactive!

You will hopefully be aware of the fact HMRC are introducing a new penalty regime which will apply to all VAT returns rendered with a due date of 1 April 2009 onwards but which will cover not just VAT but Corporation Tax, Capital Gains Tax, National Insurance Contribution (NIC), PAYE and CIS.

From a VAT perspective this is a major sea change as it differs substantially from the one currently in place. It is more subjective and makes it far more likely that a business will incur a penalty of up to 100% of the VAT due even if the error has been disclosed in writing to HMRC.

We widely predict that all businesses could be affected by these changes since any errors will be subjectively examined to see whether a business has taken 'reasonable care' in its VAT affairs and if it has not then a penalty will be leviable. We see this as a major issue since many 'compliant' businesses will now potentially fall into the penalty regime, a regime which is on face value very punitive.

However! We can help by undertaking systems reviews - after all HMRC's criteria is based on whether 'reasonable care' has been exercised. NOW is the time to undertake accounting system reviews to ensure you do exercise 'reasonable care' in making your VAT declarations.

If you would like to find out more or have any questions, we will be delighted to offer any help or advice. Please contact Peter Hogan at Darlington, Nicola Bellerby at Durham or Terry Doyle at York.

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