Analysis of HM Revenue and Customs (HMRC) data by UHY Hacker Young has led to suggestions that the tax authority is ‘railroading’ British businesses into a system of unnecessary fines and penalties.
Experts have said the system of automatic fines is developing “a breakdown of trust” between UK business owners and the taxman.
The HMRC data assessed showed that almost half of all fines handed out for late filing of VAT returns were actually incorrect.
The figures showed 49 per cent of the 17,200 automatic penalties issued by HMRC for the late filing of VAT returns in 2013 were overturned when taxpayers requested a formal review.
Simon Newark, partner at UHY Hacker Young, said: “HMRC’s late filing system starts off with the premise that the taxpayer is wrong – you then have to prove your innocence.
“In a lot of ‘borderline’ review cases, where we feel the taxpayer should be given the benefit of the doubt, HMRC is now rubber-stamping the automatic penalty.
“Taxpayers should be allowed to explain their situation first before they are railroaded into a system of fines and penalties.”
Mr Newark also remarked that many “poor or incorrect” VAT decisions were left to stand, simply because it would cost too much to take HMRC to a tribunal.
“There is a breakdown of trust in the system, as businesses see the review process as HMRC ‘nodding through’ its own poor decisions in the hope the business will back down,” he added.
“As the review system moves further away from its original aim of being a detailed and objective examination of potential errors, a greater number of businesses are finding that time spent battling with the tax authority over its mistakes is simply wasted.”
New figures obtained last week by the Telegraph found that the overall number of individuals being investigated by HMRC doubled to 240,000 in 2013, compared with 119,000 in 2011-12, thus reinforcing the fear that the Government is making an example of professionals who have made innocent filing errors.
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