HM Revenue & Customs is cracking down on tax errors in company accounts,
resorting more to penalty fines rather than technical adjustments, it has
Ian Mills, senior partner at PKF, the mid-tier accounting firm, told
Accountancy Age that in the last year the Revenue had taken a different
attitude to accounting errors.
Accounting for various items of expenditure will lead to different taxable
allowances and deductions, meaning that accounting changes will often lead to a
higher or lower tax bill.
‘The Revenue is now seeking penalties in situations where they would have
been content to settle for a technical adjustment to the accounts,’ Mills said.
The move appeared to be part of a crackdown, he said, with inspectors
appearing apologetic at times for policy imposed from above. ‘Inspectors have
now been instructed to seek the recovery of a penalty,’ he added.
Penalties apply to companies in such cases of up to 100% of the value of the
unpaid tax, though typically it is around 25%.
Commonly, inspectors will apply penalties where insufficient care has gone
into the preparation of accounts. But the new penalties apply irrespective of
that and involve cases where there were complex accounting and tax rules
involved, and where mistakes had arisen and the issues over them were not
clear-cut. Many were entirely innocent errors, Mills said.
He added that he would not be surprised if the Revenue applied the rules to
all companies, big or small, and that if it detected problems in large firms, it
might be keen to use them as an example of its attitude towards such issues.
The developments will be seen by many as further evidence of the Revenue’s
desire to collect more and more in tax from companies. The latest figures from
July revealed that corporation tax receipts rose by more than 20% on the
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