EM5182 - Penalties: Culpability - Defences: “Innocent Error”: Reliance on Third Party

The customer has an obligation to make a return. Any accounts submitted on their behalf are deemed to have been submitted by the customer unless they can prove that the accounts were submitted without their consent or connivance. It is therefore the customer's personal duty to ensure that the returns and accounts are correct, see EM4802.

Agent

Many customers will find that they need professional advice and it would be negligent for the customer to complete a return without resolving a point on which they were in real doubt. The extent to which the customer is entitled to place reliance on that advice will vary according to the circumstances. For example, an astute businessman who professes to rely on the advice of an obviously incompetent agent is unlikely to be believed by the tribunal, see EM5130.

Material adjustments may have been made that arise from purely technical considerations. An expense genuinely incurred may be disallowed under a statutory prohibition of which the particular taxpayer might not be expected to be aware.

Bank

A customer with a number of bank accounts will usually be a person of substance who will always want the best return on the capital invested and will know, at least approximately, what interest to expect. In addition, statements in the course of the year will tell precisely what has been credited to each account. A challenge would be made if those statements appear to materially understate the income. However, it is not uncommon in such a case for the customer's agent to request annual statements from the banks, in letter form, of the interest credits. Often such statements are incomplete. Any minor discrepancy arising from such an error can be regarded as innocent but a major discrepancy should have been spotted by the customer (with earlier records to refer to, and own expectations as to interest) who would be considered negligent if the bank's figures are merely accepted.

HMRC

A customer who consulted a Tax Office or contact centre and acted in good faith in accordance with the advice given (which should be shown to have been given) would not be negligent if the advice proved to be wrong.

See CH160700 for detailed guidance on reliance on another person.