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The first in our series of TAX articles from HMRC. If you want to get ahead in TAX this is the place to be.

In yet another first, we have signed up HMRC to provide us with a series of exclusive articles that will appear in PQ in the coming months

Did you know that from April next year, a single, much simpler penalty scheme for incorrect returns is being introduced across a wide range of different taxes, including income tax, corporation tax, capital gains, VAT, PAYE and National Insurance? It will apply to tax returns and documents due to be filed on or after 1 April 2009. Under the new system, as long as 'reasonable care' is taken when filling in returns and documents, you will no longer be charged a penalty if there is an error on a return.
What it means
The new scheme means that the way the penalties are calculated will be linked to the cause of the error – the more serious the reason for the error, the higher the penalty will be. In other words, you could be charged a penalty of up to 30% of the extra tax due if you have failed to take reasonable care. If you have sent in a return with deliberate errors, the penalty will be more severe – up to 70%. And if you have intentionally sent an incorrect return or document, and have tried to conceal the errors, the penalty can be up to 100%.
Remember, though, that HM Revenue and Customs (HMRC) can substantially reduce any penalty if you tell it about any errors, help it work out if any extra tax is due, and allow it to check your figures. And if you get charged a penalty, you can always appeal against it.
What is 'reasonable care'?
Some of the ways you can take reasonable care are by:
* Keeping accurate records that you regularly update, to make sure your tax returns are correct.
* Saving your records in case you need them later.
* Checking what the correct position is when you don't understand something, or seeking advice from HMRC or a tax professional.
* Telling HMRC promptly about any error you discover after you send a tax return or document.
Other penalties
These changes don't affect penalties for filing your return late, or not paying on time. However, these penalties are currently being reviewed by the government. There are also plans to extend the new penalties for incorrect returns system across all the other taxes administered by HMRC, from 1 April 2010.

Where can I go for more information?
A new leaflet, entitled 'Take care to avoid a penalty', is available from local tax offices
or from the HMRC website, at www.hmrc.gov.uk/about/new-penalties.
* Thanks to HMRC for this article

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