Careless behavioural penalties for UK and offshore errors

Careless penalties are applied when a taxpayer failed to take reasonable care to get things right. At the end of an HMRC enquiry where errors were found the taxpayer and HMRC must agree the penalty position. Anyone outside the tax profession may think agreeing the penalty position is a simple formality. For those in the profession we know it is anything but.

What are behavioural penalties?

Behavioural penalties are charged in relation to inaccuracies when an error is discovered in a return or document submitted to HMRC.

There are three types of behaviour for penalty purposes:

• Reasonable care. No penalty is charged in these circumstances. This is where the taxpayer has taken all reasonable steps to ensure their affairs are correct but a mistake has still occurred. In practice there is a very high bar for reasonable care and HMRC is usually very reluctant to...