Commentary

A4.531 When penalties for inaccuracy apply

Administration and compliance

A4.531 When penalties for inaccuracy apply

A4.531 When penalties for inaccuracy apply

For the latest New Development, see ND.1615.

The harmonised penalty regime applies where a person gives HMRC a document containing an inaccuracy (see A4.532 for the meaning of document and inaccuracy in this context) leading to one of the following1:

  1.  

    (a)     an understatement of liability to tax

  2.  

    (b)     a false or inflated claim to a loss

  3.  

    (c)     a false of inflated claim to repayment of tax

and the inaccuracy was careless or deliberate on that person's part. Third party penalties and those imposed where a taxpayer fails to notify HMRC of an under-assessment are discussed below.

Errors which have no tax consequences, such as a mistake over an address, cannot be the subject to a penalty as they do not meet the above definition of an inaccuracy from which a tax error arises.

A penalty cannot be imposed unless HMRC can show that the inaccuracy in the document resulted from a degree of culpability on the part of the taxpayer. There are three degrees of culpability:

  1.  

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