We couldn’t resist. You wouldn’t really expect us to, would you? So here are our top five penalty hints.
If a tax return is incorrect because of carelessness (but not deliberate inaccuracy) any penalty can, at HMRC’s discretion, be suspended. But there is no power to suspend a penalty for a late return.
If a return proves to be inaccurate because ‘avoidance arrangements’ (as defined) don’t work, the inaccuracy is presumed to have been ‘careless’ unless the taxpayer can show that he or she took ‘reasonable care’. And relying on ‘disqualified advice’ (as defined – broadly anything other than specific independent advice from a competent and disinterested person) doesn’t count as taking ‘reasonable care’.
It’s not only your own errors that can land you with a penalty! If HMRC issue you with an assessment which understates your liability to tax and you don’t within 30 days take ‘reasonable steps’ to tell HMRC of their error, you become liable to a penalty of up to 30% of the understatement. (Is HMRC liable to a penalty if they carelessly over-assess you? Strangely not…)
If a partnership return is incorrect due to carelessness or deliberate failure on the part of the person filing it, it’s only the partners whose tax bill is affected by the inaccuracy who are liable to pay a penalty. But they are liable even if they are personally entirely blameless.
Two recent cases have given conflicting decisions on whether there can be a ‘reasonable excuse’ for failure to pay an accelerated payment notice that you genuinely and credibly believe to be incorrect. Beadle says you must pay even if it’s plainly wrong, and that your only recourse is judicial review (JR). Chapman says that it’s reasonable to decline to pay a manifestly incorrect demand. Both agree that merely being party to ongoing JR proceedings is not a reasonable excuse.
We couldn’t resist. You wouldn’t really expect us to, would you? So here are our top five penalty hints.
If a tax return is incorrect because of carelessness (but not deliberate inaccuracy) any penalty can, at HMRC’s discretion, be suspended. But there is no power to suspend a penalty for a late return.
If a return proves to be inaccurate because ‘avoidance arrangements’ (as defined) don’t work, the inaccuracy is presumed to have been ‘careless’ unless the taxpayer can show that he or she took ‘reasonable care’. And relying on ‘disqualified advice’ (as defined – broadly anything other than specific independent advice from a competent and disinterested person) doesn’t count as taking ‘reasonable care’.
It’s not only your own errors that can land you with a penalty! If HMRC issue you with an assessment which understates your liability to tax and you don’t within 30 days take ‘reasonable steps’ to tell HMRC of their error, you become liable to a penalty of up to 30% of the understatement. (Is HMRC liable to a penalty if they carelessly over-assess you? Strangely not…)
If a partnership return is incorrect due to carelessness or deliberate failure on the part of the person filing it, it’s only the partners whose tax bill is affected by the inaccuracy who are liable to pay a penalty. But they are liable even if they are personally entirely blameless.
Two recent cases have given conflicting decisions on whether there can be a ‘reasonable excuse’ for failure to pay an accelerated payment notice that you genuinely and credibly believe to be incorrect. Beadle says you must pay even if it’s plainly wrong, and that your only recourse is judicial review (JR). Chapman says that it’s reasonable to decline to pay a manifestly incorrect demand. Both agree that merely being party to ongoing JR proceedings is not a reasonable excuse.
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