What is reasonable care from a tax point of view?

Source: HM Revenue & Customs | | 12/12/2017

The tax penalty system is intended to make penalties simpler to understand and more consistent across many taxes. The penalties can range from 0% where reasonable care is taken, but nonetheless an incorrect return is submitted up to 100% of the tax where an error is deliberate, and the taxpayer attempts to conceal it.

HMRC has the power to significantly reduce the amount of penalties due. The largest reductions are for unprompted disclosures (as against prompted disclosures). The penalties also vary depending on the taxpayers’ behaviour. HMRC has 4 levels of behaviour ranging from taking reasonable care in dealing with errors to careless, deliberate or deliberate and concealed behaviour patterns.

There is no definition of reasonable care from a taxation standpoint. However, HMRC’s commentary in this area is helpful. HMRC accepts that ‘reasonable care’ cannot be identified without consideration of the particular person’s abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims and accepts that what is necessary for each person to discharge that responsibility has to be viewed in the light of that person’s abilities and circumstances.

HMRC gives the example of not expecting the same level of knowledge or expertise from a self-employed un-represented individual as we do from a large multinational company.

Planning note

Special rules apply when considering what is reasonable care for inaccuracies relating to avoidance arrangements occurring on or after 16 November 2017.



 

Username:
Password:
 

Latest News

A reminder of ways you can pay tax due
17/01/2018 - More...
Last week we confirmed that as from 13 January 2018, HMRC will not accept personal credit cards for payment of tax or penalties. We have listed below the payment options you still

Buying a rental property?
17/01/2018 - More...
The removal of the 10% wear and tear allowance that allowed landlords to reduce the tax they paid on furnished property lets (after the end of the 2015-16 tax year) was a

Projects that count as R & D for tax purposes
17/01/2018 - More...
Research and Development (R&D) tax credits were introduced for small and medium sized enterprises (SMEs) in 2000 and for large companies in 2002. R&D credits are a

Search


Newsletter

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the Newsletter
» Login