The tax penalty system is intended to make penalties simpler to understand and more consistent across many taxes. The penalties can range from 0% where reasonable care is taken, but nonetheless an incorrect return is submitted up to 100% of the tax where an error is deliberate, and the taxpayer attempts to conceal it.

HMRC has the power to significantly reduce the amount of penalties due. The largest reductions are for unprompted disclosures (as against prompted disclosures). The penalties also vary depending on the taxpayers’ behaviour. HMRC has 4 levels of behaviour ranging from taking reasonable care in dealing with errors to careless, deliberate or deliberate and concealed behaviour patterns.

There is no definition of reasonable care from a taxation standpoint. However, HMRC’s commentary in this area is helpful. HMRC accepts that ‘reasonable care’ cannot be identified without consideration of the particular person’s abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims and accepts that what is necessary for each person to discharge that responsibility has to be viewed in the light of that person’s abilities and circumstances.

HMRC gives the example of not expecting the same level of knowledge or expertise from a self-employed un-represented individual as we do from a large multinational company.

Planning note

Special rules apply when considering what is reasonable care for inaccuracies relating to avoidance arrangements occurring on or after 16 November 2017.

The low-emission vehicles plug-in grant can help you save up to £4,500 on the purchase price of a new electric or hybrid car. The scheme was first launched in 2011 and is available across the UK and offers a grant towards the price of eligible new cars. The paperwork for the grant application is handled by the dealer you purchase your car from.

HMRC publishes a list of qualifying cars, and only cars listed are eligible for the grant. The list is divided in to 3 main categories.

• Category 1. Vehicles with CO2 emissions lower than 50g/km and a ‘zero-emission’ range of at least 112km.
• Category 2. Vehicles with CO2 emissions lower than 50g/km and a ‘zero-emission’ range of at least 16km.
• Category 3. Vehicles with CO2 emissions of 50 to 75g/km and a ‘zero-emission’ range of at least 32km.

The maximum grant of £4,500 (previously £5,000) is available for cars listed in category 1. For cars listed in categories 2 and 3, the maximum grant is £2,500. The grant will pay for up to 35% of the purchase price for these vehicles up to the monetary cap of each category. The scheme is open to qualifying purchases by private individuals and businesses.

Planning notes

To qualify for the grant, the cars must also come with a warranty covering batteries for at least three years, or 60,000 miles. There is also an ‘on the road’ price cap of £60,000 over which no grant is available. This means that many popular environmentally friendly electric cars such as some Tesla models are not available under the scheme.

As part of the Budget measures, it was confirmed that the a further £100m has been set aside to ensure the scheme will remain available until at least 2020 to help encourage the growth of this sector.

The latest advisory fuel rates became effective on 1 December 2017. Fuel rates are reviewed four times a year with changes taking effect on 1 March, 1 June, 1 September and 1 December. You can use the previous rates for up to 1 month from the date the new rates apply.

The rates are as follows:

Engine size	Petrol – amount per mile	LPG – amount per mile
1400cc or less	11p	7p
1401cc to 2000cc	14p	9p
Over 2000cc	21p	14p

Engine size	Diesel – amount per mile
1600cc or smaller	9p
1601cc to 2000cc	11p
Over 2000cc	13p

 Hybrid cars are treated as either petrol or diesel cars for this purpose.

As part of the Budget measures, several changes were announced to both the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) scheme. These schemes are designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

The EIS offers generous tax reliefs including 30% income tax relief. The maximum annual amount that an individual can currently invest through the EIS is £1 million. The Chancellor announced that the current limit of £1 million will be doubled to £2 million where any amount above £1m is invested in knowledge-intensive companies.

The VCT scheme offers investor’s income tax relief of 30% on new subscriptions for ordinary shares in VCTs. The maximum amount qualifying for relief is £200,000 in each tax year. No changes were announced to this limit. These generous tax allowances are designed to off-set the fact that making investments in these types of companies can carry a high-risk. 

The Chancellor also pledged to increase the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs, to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million. There will also be changes to the company age limit when knowledge-intensive companies can begin to attract funds.

These changes will have effect on and after 6 April 2018, and will be subject to the normal state aid rules.

A new measure to tackle disguised remuneration tax avoidance schemes was announced as part of the Autumn Statement 2016. The new measure will introduce a loan charge on disguised remuneration avoidance schemes that remain unpaid on 5 April 2019.

These types of schemes (including contractor loans) are used by employers and individuals and seek to avoid paying income tax and NICs. This is usually done by utilising a loan or other payment from a third-party which is unlikely to be repaid.

HMRC has often stated that the only way to avoid the new loan charge in 2019 is by making a repayment of the loan balance or settling your tax liability with HMRC in advance. A new settlement opportunity has been launched to allow those affected to settle their tax affairs before the loan charge comes into effect.

Any taxpayers that want to settle their tax affairs should register their interest with HMRC by 31 May 2018. This must be followed by the submission of all required information by 30 September 2018 to allow time to settle the taxpayers’ affairs before the new charge starts in April 2019. 

Planning note

The settlement terms vary depending on whether the taxpayer is classed by HMRC as a contractor, employer or employee but in essence any income tax and NICs liabilities that are deemed due will need to be repaid together with interest in some cases. This is a complex area and those affected need to consider their options carefully. Please call if you would like more advice on this issue.