The number of penalties HMRC imposed on taxpayers for ‘deliberate errors’ on tax returns rose to 34,100 last year, up from 28,700 in 2015/16.
This is due to HMRC looking to squeeze more revenue from taxpayers to bridge the gap between actual tax revenue it receives and the expected level of tax revenue it believes it should receive.
Penalties for deliberate mistakes
HMRC can impose a penalty for what it believes are deliberate mistakes, when an inaccuracy is intentional, or the tax payer knew of an inaccuracy and did not correct the error.
Deliberate penalties allow HMRC to charge a much higher fine than the other category of penalties – for ‘careless behaviour’. A taxpayer could also be ‘named and shamed’ by HMRC.
Imposing a penalty for deliberate behaviour also allows HMRC to then subsequently monitor a taxpayer’s affairs more closely for several years – a decision which the taxpayer cannot appeal. As a result, these penalties can enhance HMRC’s chances of generating additional revenue from the same individual.
Increased pressure on tax revenue
The rise reflects pressure on HMRC officers to collect more revenue by imposing bigger penalties and does not necessarily mean more people making deliberate errors. Last year, the tax gap, which is the difference between the amount of tax HMRC thinks it is due and what it actually collects, increased by £1bn to £34bn, up from £33bn in 2014/15.