The figure is up from £681m in 2021/22, as HMRC has ramped up compliance activity after the pandemic, when investigations stalled.

This was the highest value on record for tax penalties and has been consistently rising over the last three years, exacerbated by the growing size of the tax debt, estimated at £37bn. However, half of the penalties are withdrawn on appeal.

The analysis by UHY Hacker Young showed that a majority of the fines affected businesses that were already experiencing issues with their finances and struggling to pay on time. Many more were being fined due to errors in paperwork.

With high interest rates and inflationary pressures, the number of businesses failing to comply with tax liabilities is likely to rise.

However, ‘a significant number of fines are withdrawn when challenged’, according to UHY Hacker Young, so businesses and individuals should be looking to appeal penalties.

The scope of VAT penalties has been expanded this year giving HMRC more powers so they can issue penalties related to nil returns and repayment returns more easily.

Sean Glancy, partner at UHY Hacker Young said: ‘HMRC continues to widen the net for tax penalties, so people who weren’t captured before are getting caught now. Penalties are an easy win for the Treasury, and they clearly rack up.

‘These penalties are extremely unhelpful as individuals and businesses continue their post-pandemic recovery. Many are still struggling to pay on time and if that continues or worsens, there will be more penalties. Others are being fined for very basic errors. People must pay extra attention to stay on the right side of the line.

‘HMRC is often not reasonable in removing penalties for genuine errors – they sometimes seem to operate with a “shoot first, ask questions later” approach. Once a penalty is issued, the process is quite draconian, however about half of penalties are withdrawn on appeal.’

Another area to watch out for is HMRC’s interpretation of deliberate behaviour.

David Jones, tax director at UHY Hacker Young said: ‘A pattern over recent years has been HMRC’s aggressive view of what constitutes deliberate behaviour and their stubbornness around that issue.

‘Once characterised as deliberate behaviour, the penalty tariff rockets and that could be reflected in the high penalty figures. However, the recent P Gopaul case suggests the Courts are waking up to this – but you must be prepared to appeal and argue your case.’

An HMRC spokesperson said: ‘We’re committed to helping customers pay the tax they owe, on time.

‘We charge penalties to encourage customers to meet their obligations, while acting as a sanction for those who don’t.

‘If customers are unable to pay on time, they can contact us to discuss their options.’

Taxpayers, including businesses and individuals, can arrange a time to pay arrangement if they have tax debts under £30,000.