Tax: why it pays to be organised

Under the new penalties system being introduced, if you take reasonable care to get your tax returns right, you will not be charged a penalty if you make an error. After all, everyone makes mistakes.

There are still a few businesses out there who don't care whether or not they file their returns correctly, or worse, try to conceal errors that lead to underpayments. HMRC will use the penalties to come down hard on businesses like this, to prevent them from gaining an unfair advantage.

Although the new penalties won't be levied until after 1 April 2009, it's important to act now and get your paperwork organised, to avoid a potential penalty when it's time to submit your returns.

How to take reasonable care

Following these tips from HMRC will help you prove your business does take reasonable care – and avoid a potential penalty for errors:

• Keep accurate records and update them regularly
• Save your records in case you need them later
• If you don't understand something, ask HMRC or your tax agent
• Don't wait for HMRC to tell you you need to pay tax – be proactive and find out
• If you discover you've made an error, let HMRC know ASAP

The new penalties will apply to VAT, PAYE, National Insurance, Capital Gains Tax, Income Tax, Corporation Tax and the Construction Industry Scheme. They will also apply to Self-Assessment taxpayers.

They will apply to tax returns or other documents for periods starting on or after 1 April 2008, that are due to be filed on or after 1 April 2009. But don't leave it till the end of the financial year to take action – start now!

Finding more information

You can find out more information on these changes to penalties at www.hmrc.gov.uk/about/new-penalties or by asking your tax agent.

To find out more about keeping the right records, please go to www.hmrc.gov.uk/startingup/keeprecs.htm or phone the helpline number on the tax return or letter they have sent you.