Failure to return tax forms on time will hit companies where it hurts.
New penalties for late tax returns will stifle entrepreneurialism amongst small businesses rather than encourage it, experts have warned.
From April 6th, HMRC will impose tougher financial penalties for people filing their personal tax returns late, as well as introduce new punishments for failing to pay on time.
The new penalty regime will include a £100 fixed penalty immediately after the due date; £10 a day for returns that are more than three months’ late; penalties of 5 percent of the tax due for the return period or £300 (whichever is greater) for failure to pay after six months and again at 12 months; and a higher penalty of 70 percent of the tax due after 12 months.
Online accounting firm Crunch has hit out at the move though, claiming the introduction of higher penalty rates for small business owners, freelancers and contractors filing late tax returns are “harsh”.
Crunch managing director Darren Fell said: “David Cameron recently spoke about how entrepreneurs would lead the economic recovery but we fail to see how these harsh new penalties will help people who work for themselves.”
Fell questioned the existence of evidence to suggest that hiking the penalties will encourage more people to hit the deadline.
“We believe a more educational approach is needed to ensure returns are completed correctly. Also, online services should be vastly improved to help complete and submit the returns easily and quickly,” he said.
The hike in penalties is being introduced as part of the 2009 Finance Act.