‘Penalties’ by Mark McLaughlin CTA (Fellow) ATT (Fellow) TEP, Editor and a co-author of HMRC Investigations Handbook (Bloomsbury Professional)

Mark McLaughlin highlights a difficulty that can sometimes arise in the calculation of penalties for errors in tax returns.

Taxpayers who submit tax returns to HMRC each year are at constant risk of penalties for errors in their returns. Tax return errors are often difficult to avoid. Fortunately, not every tax return error automatically results in a penalty. For example, no penalty arises if an error has occurred despite ‘reasonable care’ having been taken.

That’s a penalty!

A penalty arises broadly if (for example) an individual submits a tax return that contains an error resulting in a tax liability being understated, where the error was ‘careless’ (i.e., reasonable care was not taken) or deliberate on that individual’s part (FA 2007, Sch 24, para 1).

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