Part 1Liability for penalty
Error in taxpayer’s document
1(1)A penalty is payable by a person (P) where—
(a)P gives HMRC a document of a kind listed in the Table below, and
(b)Conditions 1 and 2 are satisfied.
(2)Condition 1 is that the document contains an inaccuracy which amounts to, or leads to—
(a)an understatement of P’s liability to tax,
(b)a false or inflated statement of a loss by P, or
(c)a false or inflated claim to repayment of tax.
(3)Condition 2 is that the inaccuracy was careless or deliberate (within the meaning of paragraph 3).
(4)Where a document contains more than one inaccuracy, a penalty is payable for each inaccuracy.
| Tax | Document |
|---|---|
| Income tax or capital gains tax | Return under section 8 of TMA 1970 (personal return). |
| Income tax or capital gains tax | Return under section 8A of TMA 1970 (trustee’s return). |
| Income tax or capital gains tax | Return, statement or declaration in connection with a claim for an allowance, deduction or relief. |
| Income tax or capital gains tax | Accounts in connection with ascertaining liability to tax. |
| Income tax or capital gains tax | Partnership return. |
| Income tax or capital gains tax | Statement or declaration in connection with a partnership return. |
| Income tax or capital gains tax | Accounts in connection with a partnership return. |
| Income tax | Return for the purposes of PAYE regulations. |
| Construction industry deductions | Return for the purposes of regulations under section 70(1)(a) of FA 2004 in connection with deductions on account of tax under the Construction Industry Scheme. |
| Corporation tax | Company tax return under paragraph 3 of Schedule 18 to FA 1998. |
| Corporation tax | Return, statement or declaration in connection with a claim for an allowance, deduction or relief. |
| Corporation tax | Accounts in connection with ascertaining liability to tax. |
| VAT | VAT return under regulations made under paragraph 2 of Schedule 11 to VATA 1994. |
| VAT | Return, statement or declaration in connection with a claim. |
| Income tax, capital gains tax, corporation tax or VAT | Any document which is likely to be relied upon by HMRC to determine, without further inquiry, a question about— (a) P’s liability to tax, (b) payments by P by way of or in connection with tax, (c) any other payment by P (including penalties), or (d) repayments, or any other kind of payment or credit, to P. |
Under-assessment by HMRC
2(1)A penalty is payable by a person (P) where—
(a)an assessment issued to P by HMRC understates P’s liability to tax, and
(b)P has failed to take reasonable steps to notify HMRC, within the period of 30 days beginning with the date of the assessment, that it is an under-assessment.
(2)In deciding what steps (if any) were reasonable HMRC must consider—
(a)whether P knew, or should have known, about the under-assessment, and
(b)what steps would have been reasonable to take to notify HMRC.
(3)In sub-paragraph (1) “tax” means—
(a)income tax,
(b)capital gains tax,
(c)corporation tax, and
(d)VAT.
Degrees of culpability
3(1)Inaccuracy in a document given by P to HMRC is—
(a)“careless” if the inaccuracy is due to failure by P to take reasonable care,
(b)“deliberate but not concealed” if the inaccuracy is deliberate but P does not make arrangements to conceal it, and
(c)“deliberate and concealed” if the inaccuracy is deliberate and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure).
(2)An inaccuracy in a document given by P to HMRC, which was neither careless nor deliberate when the document was given, is to be treated as careless if P—
(a)discovered the inaccuracy at some later time, and
(b)did not take reasonable steps to inform HMRC.