New fines strike business

The Inland Revenue came under renewed fire this week over its controversial working families tax credit, after it emerged employers face fines of up to #3,000 for mistakes in administering the new system.

The Revenue has made no formal announcement about penalties, but senior practitioners and business representatives reacted angrily to disclosures that the tax credit – which has already been criticised for requiring businesses to do the administrative job of government – would be accompanied by a regime of fines.

The new system will hit employers next April, forcing them to pay tax credits to eligible working families and disabled people through the pay packet. Details are included in the Tax Credits Bill, due for its second parliamentary reading later this month.

Critics have slammed the move as partial privatisation of the social security system, and complained it will impose yet more red tape on businesses overburdened by bureaucracy.

Practitioners, predicting a large number of innocent errors, called for the new regulations to be applied gently. ‘We would prefer the Revenue help people rather than penalise them,’ said Anne Redston, tax partner at Ernst & Young.

The Federation of Small Businesses warned that the fines, details of which are yet to be published by the Inland Revenue, were high enough to force small employers – who should not be criminalised for carrying out administrative chores on behalf of the government – out of business.

Last week, Revenue chairman Nick Montagu attempted to reassure concerned MPs about the system. ‘I would expect penalties to be applied with an extremely light touch and that they would be the norm in only the worst cases. We want to ensure a safe landing for the working families tax credit,’ he said.

Francesca Lagerberg, of the English ICA’s tax faculty, warned the new system would be difficult to administer since it required employers to delve into employees’ private affairs.

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