Reasonable care ― inaccuracies in returns

Produced by Tolley in association with Philip Rutherford
Reasonable care ― inaccuracies in returns

The following Owner-Managed Businesses guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Reasonable care ― inaccuracies in returns
  • Introduction
  • Factors affecting reasonable care
  • Uncertainty and reasonable care
  • Reasonable care becoming careless
  • HMRC guidance on the meaning of reasonable care
  • Case law on the meaning of reasonable care
  • The Athenaeum Club
  • Express Food Supplies
  • J R Hanson
  • More...


The penalty regime in FA 2007, Sch 24 provides that there is no penalty where an inaccuracy leading toan underpayment of tax is made on a return or other document, provided the person took reasonable care. There is no statutory definition of reasonable care, so reliance must be placed on the guidance in the HMRC manuals and case law.

For a general overview of the penalty regime, see the Penalties for inaccuracies in returns ― overview, Calculating the penalty for inaccuracies in returns ― behaviour of the taxpayer and Calculating the penalty for inaccuracies ― potential lost revenue guidance notes.

For detailed discussion of these concepts see Simons Taxes A4.532A (direct taxes) and De Voil Indirect Tax Service V5.345 (indirect taxes).

Factors affecting reasonable care

Reasonable care will vary depending on the capabilities and circumstances of the taxpayer and the complexity of the issues affecting them. Therefore, the following are likely tobe taken into account:

  1. whether the taxpayer is represented ― in most cases an unrepresented taxpayer will have a lower understanding of the complexities of tax law than a represented taxpayer. In the case of an employer, HMRC is likely totake into account whether the payroll is run in-house and if so the level of expertise and / or qualification of the in-house staff

  2. the complexity of the tax affairs ― if a taxpayer has particularly complex affairs the taxpayer could reasonably be expected totake professional advice

  3. the taxpayer’s record keeping

  4. the systems, processes and controls in place toensure that tax is dealt with appropriately

  5. HMRC provides its understanding of reasonable care at CH81120 and CH81130

An Officer must first assess the taxpayer’s circumstances and abilities before coming toa conclusion about culpability for an inaccuracy. Anecdotal evidence suggests that in some cases HMRC is quick toassume that all inaccuracies result from carelessness.

See Example 1.

Uncertainty and reasonable care

There is particular guidance at CH81120 for those undertaking a transaction about which the tax

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