In the year to April 2016, the taxman imposed 28,663 penalties against those whose inaccurate returns deliberately understated their income, up 38% on the 20,740 penalties given out in 2014-15.
The figures, obtained by RSM using a Freedom of Information request, show that just 5,162 fines were given out in 2012-13, an almost six-fold rise in deliberate penalties over a period of four tax years.
“This spike in penalties suggests a marked change in attitude at HMRC, and it is clear that Inspectors are now taking a much harder line,” said Mike Down, head of tax investigations at RSM.
“However, HMRC needs to be wary of the perception that they are engaging in ‘penalty farming’ and ensure they don’t unfairly penalise people who are not seeking to deliberately deceive”.
Penalties are charged according to the type of taxpayer behaviour that leads to an inaccuracy and on whether the tax adjustment is volunteered freely or arises as a result of an HMRC challenge, explained Down.
There are four categories of behaviour, ranging from ‘mistake’ despite taking reasonable care, failure to take reasonable care (or ‘careless’), to ‘deliberate’ with the most serious being an inaccuracy which is ‘deliberate with concealment’.
The more serious the behaviour, the higher the penalty.
In December 2015, a report by the National Audit Office found that HMRC loses billions each year as a result of fraud and needs to improve its use of data analysis to tackle tax fraud, the hidden economy, and criminal attacks.