Penalties for inaccuracy - agents and officers

By Tolley

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

  • Penalties for inaccuracy - agents and officers
  • Who is an agent?
  • Taking reasonable care
  • Imposing a penalty

This guidance note provides an overview of how the penalties for inaccuracies will apply to agents and officers. This note should be read in conjunction with the Overview of the three penalties introduced from 1 April 2010, Penalties for inaccuracies - overview, Penalties for inaccuracies - calculating the penalty and Penalties for inaccuracies - assessing the penalty guidance notes.

Who is an agent?

When considering whether to impose a penalty on a business who has engaged the services of another party to act as their ‘agent’ or ‘someone acting on a person’s behalf’, HMRC will consider the actions of the party:

CH84530; FA 2007, Sch 24, para 18
  • whose return or document is inaccurate
  • whose liability has been under-assessed

The following could be viewed as acting on behalf of the business in respect of their tax affairs.


An employee, whether of a company, partnership or individual, is generally considered to be acting as a servant of the business and not as their agent. However if an employer submitted an inaccurate return as a result of the action or inaction of an employee, the following may apply:

  • if the employer has not taken reasonable care to set up proper systems and procedures, and to ensure that the employee is supervised and managed adequately, the employer will be liable for the inaccuracy penalty. HMRC will not accept any arguments that the employee is at fault in these situations, as a prudent and reasonable employer who has taken reasonable care would have prevented the inaccuracy.
  • if the employer has taken reasonable steps to implement proper systems

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