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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Types of inaccuracy: what is reasonable care - inaccuracies relating to avoidance arrangements

These rules for avoidance arrangements apply to all taxes where the inaccuracy is contained in a return or document submitted on or after 16 November 2017, which relates to a tax period that began on or after 6 April 2017 and ended after 15 November 2017.

For other tax periods, the normal rules apply when considering whether the person has failed to take reasonable care, see CH81120.

Every person (P) must take reasonable care when submitting documents or information, see CH81120.

Anyone who is involved with transactions or arrangements with which they are unfamiliar must ensure the tax treatment is correct or seek appropriate advice.

Where a document is given to HMRC containing an inaccuracy arising from the use of avoidance arrangements the behaviour will always be presumed to be careless unless

  • The inaccuracy was deliberate on the person’s (P’s) part, or
  • The person (P) satisfies HMRC or the tribunal that they took reasonable care to avoid the inaccuracy.

See CH81124 for a description of the avoidance arrangements to which these rules apply.

This means that when these rules apply and where a person has used an avoidance arrangement the onus is on them to show that they took reasonable care.

The burden of proof to demonstrate that a person’s behaviour is deliberate is on HMRC.

A taxpayer who can demonstrate that he acted on professional advice from a person with the appropriate expertise, which takes account of their personal circumstances will normally be able to demonstrate they take reasonable care.

Importantly however there are some types of advice that are disqualified for this purpose, see CH81123.