VAT penalty

My client has discovered an error in his VAT return for the quarter ended 31 October 2009 and calculates that as a result his business owes HMRC a further £3 000.

My client has asked his (qualified) book-keeper to add that amount to the VAT return for the quarter ended 31 January 2010. However I am a little confused about the new penalty regime.

I got the impression at a recent HMRC ‘learning together day’ that somehow this penalty had to be self assessed if one has made a ‘careless error’. Is this correct?

What criteria should be used to decide whether the client ‘took all reasonable care’ or was ‘careless’?

Assuming that the client decides that it was a ‘careless’ error and tells HMRC about it is there a risk that they will still assess a penalty anyway? And will the error result...