Man owed £1,000 tax rebate fined £1,400 for getting sums wrong

Published 15th Apr 2010

The taxman has come under fire after a man who tried to claim a rebate after overpaying his taxes received a hefty fine for making a mistake in his sums.

The taxpayer tried to reclaim £3,000 in overpaid tax for the year to April 2010, but Revenue & Customs calculated that he was owed £1,000 and fined him £1,400 for the error.

Under new penalty regulations, the Revenue can fine taxpayers up to 30 per cent of tax owed for careless mistakes and up to 100 per cent for errors that it believes were deliberate.

But accountants have warned that the penalty scheme is also being used for rebates, with the taxman now penalising those who make an error when trying to reclaim money they are owed by HMRC. The taxman fined this taxpayer 70 per cent of the £2,000 difference between the sum that he felt he was owed and the sum that HMRC calculated it would repay him.

Phil Berwick, director of tax investigations at McGrigors, a law firm that became involved in the case after HMRC issued the fine, said: “Calculating a rebate can be complicated and the taxpayer in question was unrepresented by an adviser, yet HMRC has refused to take any of this into consideration.

“We believe he made an honest mistake, so for HMRC to be fining him is outrageous. HMRC has charged this taxpayer with a higher penalty than someone committing a serious fraud under the old penalty regime.”

HMRC said that 2.93 million taxpayers claimed a rebate last year, nearly a third of all nine million selfassessment taxpayers.

The taxman is under increased pressure to clamp down on those dodging tax to help to boost tax receipts, which have slumped during the recession.

Savers with money in offshore accounts have already been targeted, with HMRC offering a “tax amnesty” for those who came forward and admitted to having money stashed offshore.

But tax experts are worried that the new penalty regime for those paying tax by self-assessment are unduly harsh and give taxpayers little benefit of the doubt.

Matthew Elliott, chief executive of the TaxPayers’ Alliance, said: “HMRC seems to have given up entirely on serving the public and taken to bullying them instead. We have a hugely complex tax system, and no one should be fined for being unable to understand its every technicality.

“A lot of people are already angry at being overtaxed and, if HMRC tries to deter them from claiming rebates in this way, tempers are going to rise further. The tax system and the tax authorities have ceased to be fit for purpose.”

A spokesman for HMRC said: “We can’t comment on individual cases. It is important that people pay the right amount of tax and reclaim only the amount of tax they are entitled to. Any penalty can be appealed to an independent tribunal.

“The new penalty system does not introduce tougher penalties — the maximum rates are the same as they were previously.”

Penalties

0-30% fine of tax owed if mistake was careless and disclosure was unprompted

15%-30% careless/prompted

20%-70% deliberate/unprompted

35%-70% deliberate/prompted

30%-100% deliberate and concealed/unprompted 50%-100% deliberate and concealed/prompted

Source: ' Times '

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