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Penalties for tax return errors and reasonable care.
KEY POINTS
- Difference between a careless error and a negligent one.
- Taxpayers must provide evidence that they have taken reasonable care.
- Appointing a professional adviser does not absolve the taxpayer of responsibility for his tax affairs.
- Disagreement with HMRC on a technical point is not necessarily careless.
The UK’s tax legislation is increasingly long and complex. It is therefore unsurprising that mistakes are made in tax returns. But these can result in penalties imposed by HMRC.
The penalty regime for errors in tax returns (FA 2007 Sch 24) will be familiar to many taxpayers and agents. If an error has resulted in the understatement of a tax liability HMRC generally tries to establish whether it was careless or deliberate. An error is ‘careless’ if it arises due to a failure to take reasonable...
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