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Contractors should be aware of the tough new HMRC penalty regime which comes into play from 1st April and applies to errors made on tax returns and related documents.
The new penalty rules apply to returns and other documents submitted from 1st April 2009, but actually apply from April 2008.
The rules cover all the major types of taxation which contractors will encounter - income tax, corporation tax, VAT, CGT, PAYE and national insurance contributions.
Reasonable care required
Incredibly, the extent of the new penalties will depend on the 'behaviour' exhibited by the taxpayer in question.
If 'reasonable care' has been taken when completing tax returns, penalties are unlikely to apply. But where returns contain deliberate errors, and/or these errors are deemed to have been concealed deliberately, you might be penalised to the tune of 100% of the unpaid tax amount.
Taxpayers are expected to seek specialist help if required before submitting tax information to HMRC.
IR35
The new regime also means that contractors will need to prove that they have taken "reasonable care" in showing that their contracts are not caught by the IR35 rules.
This includes keeping accurate records, and seeking specialist IR35 status advice.
Read more in our dedicated guide to IR35 and the new HMRC penalties regime.
Further information
You can read in-depth information on the HMRC penalty rules here
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