Deliberate understatement

By Tolley
Deliberate understatement

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Deliberate understatement
  • Background
  • The importance of identifying 'deliberate behaviour'
  • What is a 'deliberate' error?
  • What is meant by 'concealed' for this purpose?
  • Interaction with the HMRC error correction regime


Unlike the concepts of 'reasonable care' and 'careless mistakes', 'deliberate but not concealed' and 'deliberate and concealed' inaccuracies determine the level of penalties due not only under FA 2007, Sch 24, but also within FA 2008, Sch 41.

The former considers ‘reasonable care' and 'careless mistakes' relate to inaccuracies contained within documents submitted to HMRC. However, the latter relates to a number of additional acts of non-compliance including the failure to notify HMRC of the chargeability to tax and the unauthorised issue of VAT invoices.

Within FA 2007, Sch 24, paras 3 and 4:

  • para 3(1)(b) states that an inaccuracy within a document given to HMRC is 'deliberate but not concealed if the inaccuracy is deliberate on P’s (a business) part but P does not make arrangements to conceal it'
  • para 4(1)(b) states that the penalty payable 'for deliberate but not concealed action is 70% of the potential lost revenue'
  • para 3(1)(c) states that such an inaccuracy is 'deliberate and concealed if the inaccuracy is deliberate on P’s part and P makes arrangements to conceal it (for example by submitting false evidence in support of an inaccurate figure)'
  • para (4)(1)(

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