Recent research suggests that automatic, and often incorrect, fines and penalties imposed on businesses by HM Revenue & Customs (HMRC) is creating a breakdown of trust between business owners and the taxman.
The survey shows that almost half of the 17,200 automatic penalties issued by the department for the late filing of VAT returns in 2013, for example, were overturned when business owners requested a review.
Unfortunately, the system at the Revenue appears to assume that the taxman is right and the taxpayer is wrong, so business owners have to prove that their figures are correct, leading to resentment and suspicion.
There is also the feeling amongst taxpayers that the department ‘nods through’ its own poor or incorrect decisions, safe in the knowledge that most businesses do not have the time or the money to take HMRC to a tribunal.
A better system for business would be where taxpayers are allowed to explain their situation before they are railroaded into the complication of fines and penalties.
As one of the organisers of the research put it, the further the review system moves away from its original aim of being a detailed and objective examination of potential errors, the greater the number of businesses that are finding that time spent battling with the tax authority over its mistakes is simply wasted.
Meanwhile, it is not only business taxpayers who are feeling threatened by the taxman. New figures show that the number of private individuals being investigated by HMRC last year doubled to 240,000, leading to fears that people who have made innocent mistakes are being targeted by the department.