HMRC have introduced new penalties effective from April 2011. If you did not file your tax return on time last year, there was a penalty of £100 – but that did not apply if there was no tax payable. HMRC say that it was not much of a deterrent. The new penalties will apply whether there is any tax outstanding or not.

There will be a £100 penalty for a late return; after three months there will be an automatic penalty of £10 per day (up to a maximum of £900); after six months there will be a further penalty which is the greater of 5% of the tax due or £300; after 12 months there will be another 5% or £300. A penalty of £1,300 for filing your tax return six months late and where there is no tax outstanding looks a bit steep. (I wonder what the position is if HMRC send you a tax return but there are no entries to put on it. Perhaps you should send it back with zero in every box together with a cheque for £0.00 just to be on the safe side.)

The penalties for failing to pay your tax on time are also increased. There is interest of course (which they say is just commercial restitution for being out of the money – funny that the same rate does not apply to tax repayments), but there will be a penalty of 5% of the tax unpaid if it is 30 days late, a further 5% if it is six months late and further 5% if it is 12 months late.

HMRC have also confirmed that the penalties for failing to disclose offshore income also come into force on 6 April 2011, with the penalties being cranked up depending on where the money has been deposited. For those territories which are looked on with disapproval by HMRC (like the UAE and Brazil, for example), the penalties can be 200% of the tax involved. At a tax rate of 50% this represents total confiscation.