The act stipulates that a 30 per cent penalty on the sum owed, plus interest, should now be the default option.

Paul Hatchett, head of tax at advisory company Premier Employer Solutions, says this represents a significant change in the status quo.

‘Previously, the maximum penalty payable was 100 per cent on top of the sum underpaid, but this could be reduced if the underpayment was disclosed, and in many cases penalties were waived completely,’ says Hatchett.

‘Now, there will be an automatic 30 per cent penalty unless employers can show to [HM Revenue and Customs] that they’ve made every effort to disclose the irregularity.’

Hatchett adds that the penalty charge of 30 per cent could apply even if the Revenue rebates tax to a company in error, and the company banks the cheque without spotting the mistake.

‘The onus is now on employers to take a more active role in ensuring they haven’t got any skeletons in the cupboard,’ Hatchett says.

The maximum penalty remains 100 per cent under the new legislation, and is reserved for employers who have deliberately underpaid tax then tried to conceal the fact.

A penalty of 70 per cent would be the norm if the employer made a genuine error, but subsequently failed to disclose it.