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HMRC internal manual

Claimant Compliance Manual

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HM Revenue & Customs
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Penalties and interest: incorrect claims - meaning of mistake or misunderstanding - enquiries or examinations

We will not charge a penalty where an over-claim arose from an error which was the result of a mistake or misunderstanding.

These types of cases will be common and will include over-claims where the customer’s individual circumstances - for example illiteracy, innumeracy, physical or mental disability, etc - mean that the error was understandable.

Note: Even in these circumstances we expect customers to have sought the support they need to make a reasonable attempt to comply with their obligations

See below for examples of what is considered a Mistake or Misunderstanding.

Example 1

Kelly is claiming tax credits for the first time. She incurs childcare charges for her two children. One child goes to the childminder full time and the other child goes to the childminder during the school holidays only.

Kelly struggles to understand the guidance and seeks help from the Helpline. However, Kelly is still unsure with the explanation given and puts down the details she thinks she has been told. She correctly claimed for the child in full time childcare but made a mistake when she claimed for the child who goes to the childminder during the school holidays.

This is a Mistake or Misunderstanding because Kelly made the effort to try to get her claim right. Although she made a mistake, she was not careless in doing so.

Example 2

Peaches showed profits of £9,256 on her first claim for tax credits when the correct figure should have been £9,756. She says she misread the number ‘7’ as a ‘2’ on her calculations and there was no intent to over-claim credits. Before signing and submitting the claim form Peaches should have taken care to ensure all entries were correct. However, this was an understandable and minor mistake to make on a first claim, so can be accepted as a Mistake or Misunderstanding. Peaches should be told that a repeat of this kind of error could result in a penalty.

Example 3

Billy is in low paid work and lives with his mother. He rings the Helpline to ask if he is able to claim WTC and they say he can claim even though he is living with his mother. Billy fills in the claim form but misunderstands what is meant by a partner and shows his mothers name etc but not her income. His mother also signs the form. An enquiry establishes that Billy showed his mother in error and it should have been a single claim. Had Billy claimed as a single person he would have received exactly the same amount. The incorrect claim arose from a Mistake or Misunderstanding.

Example 4

Angela declared her income to be the amount shown on her P60 form - £16,000. That year she had two separate employments with the same employer on different terms, one paid weekly the other monthly, with a variety of hours worked every week. The P60 erroneously showed only information from the second employment, understating her income by £2,000 - the correct figure should have been £18,000. In the circumstances it was reasonable for Angela to rely on her P60 as she could reasonably expect it to be correct, calculating her annual income figure was complicated and the amount the income was understated was not substantial. She did not fail to take reasonable care in submitting her claim, although for the future she should be advised to check her P60 carefully for any obvious errors and so we would treat this as Mistake or Misunderstanding.

As a general rule, taking the information shown on a P60 at face value is reasonable. However, we would expect some customers to realise the information on their P60 is wrong. For example, if

  • their employment arrangements are simple - i.e. they have one employment with set hours for a fixed annual salary; or
  • the amount of income understated on the P60 is substantial.

In these and similar circumstances the employer’s error on the P60 is obvious.

Example 5

Kimberley A’s child care costs were complex and she wasn’t sure she understood the guidance notes correctly so she phoned the Helpline. Kimberley had provided all the relevant information, but in completing the form made a small mistake. This was a Mistake or Misunderstanding because Kimberley A made a reasonable attempt to submit a correct claim, even though she made a mistake.