HMRC Tax Penalties and What to Do to Avoid Them
Many businesses have to comply with the tax laws in the UK. It can be somewhat stressful for start-ups and those who are self-employed as the regulations can be rather unclear. If not too understandable, it may just be the last thing on their mind.
It’s important to be on time and understand what’s to be submitted from your business, though, to avoid penalties and continue operations. Her Majesty’s Revenue and Customs, or more commonly referred to as the HMRC, is the tax authority in the UK that’s responsible for collecting taxes and assigning penalties.
Here’s what you need to know and do regarding the HMRC’s tax penalties:
Identifying The HMRC Tax Penalty Type
There are a variety of errors a business can make in regards to tax compliance, which does eventually reflect in the HMRC tax penalty type a business gets. All of them can be quite the strain on a company’s funds, so it’s best to learn ahead of time. Don’t hesitate to ask a qualified accountant who can fill you in on these penalty types. Here’s a quick rundown of them:
- Late Tax Return Penalty. A business’s tax returns should be filed and paid for before their deadline. There’s a certain fee that needs to be paid, and interest automatically tops off the tax payment.
- Late Corporation Tax Penalty. Penalties of this kind can be given depending on the business type. A company should be filing and paying for their Corporation Tax, if it applies, around nine months after the accounting period.
- PAYE Penalty. The Pay As You Earn or Paye penalty often befalls employers who are unable to cover the fees for their employees and companies. A certain percentage is charged on top of the late payment per quarter, and there’s a further charge when it exceeds a year.
Appealing For The HRMC Tax Penalty
Businesses can appeal several HRMC tax penalties if they have a good case to present to the organisation within 30 days of the penalty notice. What counts as reasonable can vary from case to case, such as a close person’s death, necessary hospital treatment, failed software or a natural disaster. People have also cited the COVID-19 pandemic in their appeal.
The HMRC will be assessing these appeals themselves. If they do end up denying the reason that you’ve presented, don’t worry. Business owners can appeal and escalate that decision to the UK’s tax tribunal.
Avoiding The HRMC Tax Penalty
The best way to deal with HRMC tax penalties is to just avoid them as much as possible. In order to prevent getting a fine, hire a reputable accountant who will be able to handle your company’s finances and comply with the tax regulations for you.
It may seem like quite the investment, but having an accountant on board is the safest way for any starting or ongoing business. Filing and meeting all tax payments on time will ensure that the company won’t be plagued by any unnecessary fees.
It’s hard for businesses to be hit with an HMRC tax penalty, so it’s best to have knowledge of how to appeal and how to prevent future penalties. Be prepared by hiring an accountant that can help save you from the penalty fees.
Looking for accountancy services for business in the UK? 1 to 1 Accountants is an accountancy firm that serves small businesses and freelancers in England. Get in touch with us today!