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Contractor accountants should be aware of unexpected fines

Contractor accountants should be aware of unexpected fines

New HMRC penalties came into effect at the beginning of the tax year (April 6th), but many contractor accountants may be unaware that their clients have been fined for late payment of PAYE for over 12 months.

The new penalty system has been set out of the HMRC website. If employers make one late payment they will not be fined as long as the remittance is less than 6 months late. But those who are repeatedly late making payments will face penalties of between one and four per cent and the figure will be determined by the number of times during the year that they have failed to pay on time.

There will also be a 5% additional penalty if employers fail to pay the original penalty by the due date.

One self employed contractor who has already been slapped with a penalty miscalculated his tax and then tried to reclaim £3,000 that he thought he had overpaid. However the actual amount of the overpayment was only £1,000. The man was fined £1,400 by HMRC for what his lawyer and contractor accountant said was an honest mistake. Under the new regulations, the taxman can fine people up to 30% of tax owed for careless mistakes and up to 100% if the error was deemed deliberate.

This situation appears to have occurred because the individual in question did not fully understand how to complete his self assessment tax return. The man, who was subcontracting under the Construction Industry Scheme, had filed a paper rather than an online return, and had not given full details of his income. He did however include his CIS deductions. If he had filed online, his return would have been automatically rejected as the HMRC system would immediately spot the discrepancy.

This case underlines the need to take immense care when filing tax papers and if anybody is in any doubt at all it is well advisable to contact a professional for help.

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Image: Surprise!!! 4/365 by bensonkua

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