The importance of getting “reasonable care” right

Government has published a new guidance page for taxpayers explaining how to ensure that they take “reasonable care” over their tax affairs and what happens if mistakes are made. The guidance also explains the penalties which HMRC will charge if a taxpayer fails to take reasonable care.

HMRC will take into account the individual circumstances of each case to assess whether reasonable care was taken. Where a taxpayer can prove that reasonable care was taken then HMRC will not charge a penalty if there are inaccuracies made in a return or any other documents.

The steps of reasonable care

• You should keep records which allow you to send accurate tax returns and other documents to HMRC
• Contacting HMRC or asking a tax adviser when you are unsure
• If you use a tax adviser, HMRC would normally consider this as having taken reasonable care unless you have provided false or inaccurate information

If you have used a tax avoidance arrangement, the rules surrounding reasonable care are different. A defeated tax avoidance arrangement will be accompanied by the presumption that the user of the avoidance scheme did not take reasonable care for the inaccuracies incurred where they relate to the use of the scheme. This assumption will only be applied to a return which relates to a tax period which began on or after 6 April 2017 and ended after 15 November 2017 and was sent to HMRC on or after 16 November 2017.

The penalty regime

HMRC may charge you a penalty if you have sent a return or other document with an inaccuracy that was either as a result of not taking reasonable care, or deliberate, and it results in one of the following;

• An understatement of tax
• A false or inflated statement of loss
• A false or inflated claim to repayment of tax

Should a penalty notice be issued, you will need to pay or appeal within thirty days of the date of the notice. HMRC calculate penalties based on the type of inaccuracy and the amount of tax due or repayable.

To read more about HMRCs approach to penalty mitigation, read our blog here.

Aspire Comment

Occasionally mistakes do happen – we are only human. However, the key to minimising the liability is to ensure that you do everything you can to take reasonable care to get things right.

Aspire can help you mitigate penalties by appealing on your behalf and advising on the best way to ensure that your policies and procedures are robust enough to minimise the potential for making errors which could result in penalties.

If you have been issued with a tax and/or penalty assessment, or if a compliance check has been opened into your tax affairs, get in touch with Aspire to discuss how we can help.