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HMRC increases taxpayer penalties

The value of penalties HMRC is imposing on taxpayers per month is on the rise, according to a study by UHY Hacker Young.

According to the firm, the tax authority collected £34m in September from penalties, marking an increase of 62% from the £21m collected in May.

The firm said that HMRC suspended tax investigations at the start of the pandemic, and shifted its focus into “helping taxpayers with emergency coronavirus assistance” – such as deferrals of tax and the introduction of the furlough scheme. This resulted in a “slump” in penalties being imposed on taxpayers for underpayment or late payment of taxes.

Due to the drop off in HMRC’s normal investigation work, UHY said the total amount taken in from penalties fell 36% from £730m to £468m in the year to September 30 2020.

The firm now believes that further increases in penalties are “likely” as HMRC shifts more of its staff back to compliance work and steps up investigations into the misuse of the government’s support schemes, such as the furlough scheme, during the pandemic.

Sean Glancy, partner at UHY Hacker Young, said: “The lull in HMRC investigations is largely over. Many accountancy firms are already reporting an increase in HMRC enquiries so if you do have tax that you have avoided or evaded then now is the time to come forward.”

He predicts that one area of investigations for HMRC in the next year is going to be furlough fraud.

Glancy added: “The first deadline on amnesty for businesses that overclaimed furlough payments ended on October 20 and HMRC have so far identified 27,000 high risk cases.

“Businesses that have not come forward under the furlough amnesty should be braced for HMRC to impose the highest penalties that it can. This is exactly the kind of area that HMRC will deliberately impose tough penalties to create a deterrent effect.”

Accountancy Today has contacted the HMRC for a comment 

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