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HMRC internal manual

Compliance Handbook

Penalties for failure to notify: other penalty issues: agent acting: reliance on use of an agent to avoid a failure

The onus is on the person to satisfy us that they took reasonable care to avoid the failure. Where an agent is acting we would expect the person to be able to provide evidence to that effect. In particular, this will include what passed between the person and the agent.

A person cannot simply appoint an agent and deny responsibility for their tax affairs. The person still has a duty to take reasonable care, within their ability and competence, to make sure that what they are signing for is correct. The person has to show that they took reasonable care, within their ability and competence, to avoid default by their agent. This will include

  • making sure that they give the agent all relevant information with which to work
  • implementing the professional advice received, and not neglecting some vital step
  • checking the agent’s work to the extent that the person is able to do so. For example, an ordinary person cannot be expected to challenge specialist professional advice on a complex legal point concerning an obligation. But if there is an obligation to notify HMRC, they ought to know whether their agent has done this on their behalf.

A person saying and meaning ‘I leave it all to my agent’ is hardly taking care, let alone reasonable care, over their obligations or the work of their agent.

A person who asks a lay colleague, or someone they meet in the pub, for advice is not taking reasonable care. The person has an obligation to choose an adviser who, so far as they can tell, is trained and competent for the task in hand.

Where a person approaches a general advice organisation, they should check that the individual adviser does have knowledge of the particular subject.

If a person approaches us for advice, they are entitled, subject to the points above, to expect that our advice will be correct.

The benchmark is a person who goes to an apparently competent professional adviser

  • gives the adviser a full and accurate set of facts
  • checks the adviser’s work or advice to the best of their ability and competence, and
  • adopts it.

The person will then have taken reasonable care to avoid failure to notify, see CH71220, on the part of themselves and their agent.

However, if an agent has acted dishonestly, although the behaviour of the agent and person (P) must be considered separately, you need to consider whether P was also culpable. It is not simply a matter of whether or not P checked the agent’s work as carefully as they were able. Irrespective of the agent’s dishonesty, P’s behaviour will be determined by reference to the relevant facts.

For example: P’s behaviour would be deliberate if they were complicit with an agent in order to evade tax. It would be non-deliberate if they had no possible way of knowing about the agent’s dishonesty. If non-deliberate, you would need to consider whether or not P had a reasonable excuse. Factors to consider in such circumstances could include whether P: could have done more to stop the agent acting in the way they did; checked the agent’s work to the best of their ability; or took reasonable care on their choice of agent.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Where you suspect that a tax agent has engaged in dishonest conduct, see technical guidance starting at CH180000 and operational guidance starting at CH880000. Where you identify other types of poor agent behaviour, see CH800000.

FA08/SCH41/PARA21 (1)