Register for tax and avoid a penalty
December 1st 2010

Small business owners and the self-employed can easily get caught out by not paying the correct tax,warns HMRC

You need to tell HM Revenue & Customs (HMRC) about these or any other changes that mean you have to register for a particular tax or pay tax on undeclared income.

Under regulations that took effect from 1 April, you could pay a penalty as well as the tax you owe if you don't tell HMRC at the right time that: You're liable to tax because your new business has made a profit; Your business's turnover has reached the VAT registration threshold; You sell an asset and make a capital gain on which tax should be paid You have any income that isn't taxed and you haven't declared it.

What could it cost?

The new penalty for failing to tell HMRC about taxable income is a percentage of the tax that you owe.You may pay a higher penalty if you deliberately fail to tell HMRC about your income – and an even higher penalty if you take steps to hide it.

The amount you will pay depends on how HMRC views your actions: Not deliberate – the penalty is between 0 and 30 per cent of the tax you owe Deliberate but without concealment – 20 to 70 per cent of the tax owed Deliberate with concealment – 30 to 100 per cent of the tax owed.

The amount of the penalty will also depend on how much help you give HMRC.If you provide access to your records and help HMRC calculate what tax is due, the amount will be reduced.

HMRC can reduce the penalty to zero if you get in contact within 12 months of the change to your income. Even after 12 months the penalty can be greatly reduced if you contact HMRC about the change before it's discovered.

See:www.hmrc.gov.uk/about/new-penalties/index.htm for more information.