Was inaccuracy caused by deliberate or careless behaviour?

The taxpayer traded as a car dealer. During an compliance visit in 2019 HMRC discovered errors in accounting for output tax and claiming input tax. It raised an assessment for periods 3/15 to 12/18 which the taxpayer did not dispute. The appeal concerned a 43.5% penalty issued by HMRC for ‘deliberate not concealed’ behaviour. The minimum penalty for ‘prompted disclosure’ is 35% but HMRC did not give full reductions for the taxpayer’s co-operation during the review.

The First-tier Tribunal highlighted that the burden of proof is on HMRC to show that deliberate errors have taken place. A definition of deliberate behaviour from past case law was noted by the judge as the situation where a taxpayer ‘knowingly provides HMRC with a document that contains an error’. HMRC argued that the taxpayer made identical errors in 2014 with regard to accounting for VAT so should not have repeated...