HMRC have unveiled plans to triple the fine given to small business owners for late payment of taxes.
The move - which has been branded ‘draconian’ - would see the introduction of a sliding scale fine system, moving the maximum penalty from five per cent of outstanding tax bills to up to 15 per cent.
Changes to tax returns
This comes as part of HMRC’s ‘Making Tax Digital’ reorganisation, which also suggest that businesses would need to file their tax returns online, and complete them every three months instead of annually.
However, those earning under £10,000pa would not be required to make these quarterly digital submissions.
Penalty hike for late tax payments
Currently, those who miss the annual tax return deadline initially face a single flat-rate fine of £100.
Then, if your tax bill isn’t paid after 30 days, you face a fine of five per cent of the tax due, and then another five per cent after six months, and a further five per cent after 12 months.
Under these new proposals, there would be a sliding scale, so you could face a penalty of four per cent at 30 days, 10 per cent at six months, and then 15 per cent of your unpaid bill if you were 12 months late.
Proposals met with criticism
HMRC is already pretty unpopular - a recent Simply Business poll found that over half of small businesses are dissatisfied with their services - and these changes are not likely to be welcomed by the SME community.
Some experts have argued that the new measures are a money-raising exercise for the Treasury, and could be a nightmare for small businesses.
Anita Monteith, a tax policy adviser at the Institute for Chartered Accountants, said: “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.”
In a statement, HMRC said: “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.”
You can see the government’s proposal document here. The consultation closes in November, and until then you can email responses to MTDTA@hmrc.gsi.gov.uk.
What do you think about HMRC’s tax proposals? Tell us in the comments.