Landlords could face penalties of up to 30% of unpaid tax for 'careless' mistakes in their self-assessment returns, according to reports in the Daily Telegraph. HMRC is seeking powers to determine if an error should be considered deliberate if a taxpayer fails to correct it.
Currently, an inaccuracy is generally deemed deliberate only if someone knowingly submitted incorrect information. Under the new proposals, a careless mistake could incur a penalty ranging from 0% to 30% of the tax lost, with deliberate errors potentially carrying penalties of up to 100%.
Tax experts have raised concerns, with Nimesh Shah of Blick Rothenberg stating that many taxpayers are not represented by advisers and may not realise they have made an error, potentially exposing them to higher penalties. He also expressed concern that HMRC could use hindsight to assess taxpayer behaviour.
The proposed legislation would introduce a new obligation for taxpayers to correct mistakes once they become aware of them. HMRC could also issue a Customer Correction Notice, requiring individuals to check their tax position. A taxpayer receiving their first notice within six years would avoid a penalty for a careless error if they correct it. However, failure to comply could allow HMRC to treat the mistake as deliberate and issue tax assessments covering up to 20 years.
HMRC stated that the policy aims to improve compliance and free up resources for more complex tax avoidance cases. An HMRC spokesman said the proposals are designed to help minimise penalties for those who swiftly correct mistakes when flagged, making the process quicker and easier.