Wednesday 20 January 2021 8:31 am

Tax penalties double in six months following lockdown lull

The value of penalties imposed by HMRC has doubled in the last six months, with November up nearly 100 per cent on May.

Some £41m was collected from penalties in November 2020, up a whopping 97 per cent from the £21m that was collected in May, according to HMRC’s receipts and expenditure data.

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Penalties could be handed out to taxpayers for underpayment of tax or for submitting a tax return late.

Fee protection insurance company PfP claimed HMRC paused much of its compliance and investigative work during the early months of the pandemic, resulting in a sharp reduction in penalties being handed out.

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PfP managing director Kevin Igoe said the taxman was “ratcheting its investigations back up”.

“The huge amounts the Treasury has spent to try and stabilise the economy during the pandemic means that HMRC is going to come under huge under pressure to recoup as much tax revenue as possible,” he said.

“The taxman will, therefore, be in no mood to go easy on individuals and businesses that they believe have underpaid tax. HMRC will be looking to make up for ground lost in 2020 – that means more investigations and more penalties are inevitable.”

In response, an HMRC spokesperson said: “Our aim is for everyone to pay the tax that is due, no matter who they are.

“Our role is increasingly about making it straightforward for taxpayers to get it right, first time, while also tackling the minority who deliberately set out to cheat the system. Anyone concerned about their ability to pay their tax should contact us to see if we can help them at this difficult time.”

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Furlough fraud

PfP said in recent months HMRC had pivoted to investigating potential cases of fraud in the government’s pandemic support scheme schemes such as furlough and ‘Eat Out to Help Out’.

HMRC is also putting resources back on other core areas of tax investigation work, the insurance company added.

Figures from HMRC have found that up to £3.5bn may have been fraudulently claimed or paid in error from the furlough scheme alone.

With the scheme being extended until April 2021, PfP said there was likely to be an increase in the number of businesses that are investigated for potentially-fraudulent furlough claims.