Since HM Revenue and Customs (HMRC) announced that UK SMEs will now have to start filling their tax returns in quarterly, several discussions have taken place which have led to an idea of tripling the fine due to SMEs owners if they fail to pay their taxes on time.
The increase is looking to reach 15% from the current maximum penalty of 5%. The recent aggressive U-turn is part of HMRC’s ‘Making Tax Digital’ which will mean businesses of all sizes will have to pay their taxes online at the end of each quarter. Although the proposal has been suggested to help all businesses those whose turnover falls under £10,000 per year will be exempt.
Currently, if a business’s tax has not been paid within 30 days of the deadline then they will pay a 5% fine added to the tax owed, a further 5% will be added if it has still not been paid after 6 months and another 5% will be added after 12 months of no payment.
Although the proposal is prominent, there are others in the pipeline including taxpayers facing a fine of 4% of their tax bill if they do not pay it within the 30-day deadline, a further 10% after 6 months and 15% after 12. As expected these proposals have not been greeted with arms wide open instead many businesses trust that the penalties will cause severe consequences, especially for smaller businesses.
Tax Policy advisor at the Institute for Chartered Accountants in England and Wales (ICAEW), Anita Monteith said;
“This if 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.”
During a recent statement HMRC commented;
“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 businesses and other taxpayers to refine these proposals, and have today launched a three-month consultation period for people to tell us their views.”
If paying tax on time is something you are struggling with at the moment then don’t for settle fines, apply for a tax loan and keep your business afloat.