Careless tax returns cost ministerial positions

As the UK’s Chancellor of the Exchequer (Finance Minister) knows all too well, HMRC can impose penalties if incorrect tax returns have been submitted and tax under declared. This Guardian article explains more.

The main provisions that allow HMRC to impose penalties are contained in Schedule 24 of the Finance Act 2007 (as amended) but there are other provisions in legislation relating to specific taxes.  We do not know whether Mr Zahawi’s penalty has been imposed under Schedule 24 but it has been confirmed that HMRC have levied a 30% penalty on tax due because Mr Zahawi was careless in completing his tax returns.  The definitions of careless includes a failure to take reasonable care in completing his returns or failing to inform HMRC that there was more tax to pay if he became aware of his previous error.  In accepting a penalty of 30%, HMRC must have accepted that Mr Zahawi’s conduct was not deliberate, otherwise a penalty of 70% would be expected.  HMRC can impose penalties based on behaviours and HMRC must be able to identify fault on the part of the taxpayer.

Penalties are always unpleasant and, in some cases, financially ruinous and, in the case of Mr Zahawi, they may have prematurely ended his ministerial career. We do not know whether Mr Zahawi was professionally represented in his negotiations with HMRC.  We can, however, assist with representation at an early stage to negotiate a reduction in the percentage of the penalty or its cancellation in appropriate cases.  We can also represent a tax payer in appeals to the Tribunal against the penalty.

Photo by Kelly Sikkema on Unsplash