Could HMRC about to triple the fines for late payment of income taxes for SMEs?

If you already feel HMRC’s current system of levying fines for late payment of income tax is draconian, then Steven Glicher accountants has some bad news to impart. HM Revenues & Customs is consulting on changing the system to make it ‘fairer and more transparent’: unfortunately under these same proposals small businesses could also face increased fines of up to three times the current amounts if they fail to pay any tax owed on time.  The proposed introduction of a sliding scale fine system could theoretically result in an increase in maximum penalties anywhere between five and fifteen per cent of any outstanding tax bill.

The proposed changes are currently being consulted on as part changes under HMRC’s ‘Making Tax Digital’ proposals. Under these radical proposals businesses would also be required to file their tax returns online on a quarterly basis: however, businesses with income less than £10,000 per annum would not be compelled to make these quarterly digital submissions.  

Under the current rules, any small business income tax bills which remain unpaid 30 days after the due deadline face a fine of five per cent of the tax owed. Should the income tax due remain unpaid, further fines of an extra five per cent will be levied after six months; followed by an additional five per cent after 12 months.  

HMRC has now suggested a number of new proposals/suggestions about how the future fine sliding scale might operate in the future.  One of the options up for discussion is that taxpayers could possibly face future fines of four per cent should their tax bills remain unpaid 30 days beyond the deadline, followed by a ten per cent levy after 6 months and an additional fifteen per cent after 12 months.

Although these suggestions are simply proposals and are not yet set in stone, they have never the less been strongly criticised by leading accountancy bodies. The Institute for Chartered Accountants in England and Wales has even gone as far as to suggest that, should these proposals be enacted, there could be dire consequences for the UK’s small business community.

Anita Monteith, tax policy adviser, at the ICAEW, commented:

“This is going to be a cash cow for the taxman. Not only are [the] record keeping obligations going to be much more onerous; but making mistakes will become much more expensive.”

However HMRC has rebutted such suggestions and openly stated that:

“Our aim is for fewer people to pay a penalty at all. The proposed new system will be simpler, fairer and more proportionate.”

“We are working closely with [small] businesses and other taxpayers to refine these proposals, and have today launched a three-month consultation period for people to tell us their views.”

News / Blog


What to Consider before you Start a Business

Each year sees the rise of new companies, and though many tend to begin in January, there is no such…


Do I need a Business Qualification for a Successful Startup?

If you are considering starting your own business one day, you may be asking yourself if it’s something you are…


Start-Up’s: Keep the Costs Down

Forming your own business can often be a costly process. Some businesses are able to start with minimal investments such…


Should your Business have a Reward Scheme?

For small or medium businesses, competing against the big guys can be difficult. In order to stay on top of…