HMRC internal manual

Compliance Handbook

CH81140 - Penalties for Inaccuracies: Types of inaccuracy: Careless Inaccuracy

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

The law defines ‘careless’ as a failure to take reasonable care.

The Courts are agreed that reasonable care can best be defined as the behaviour which is that of a prudent and reasonable person in the position of the person in question

Failure to take reasonable care can be best explained in an extract taken from the FTT decision in HMRC v David Collis where Judge Berner said;

“That penalty applies if the inaccuracy in the relevant document is due to a failure on the part of the taxpayer (or other person giving the document) to take reasonable care. We consider that the standard by which this falls to be judged is that of a prudent and reasonable taxpayer in the position of the taxpayer in question.”

There is no question of whether or not the person knew about the inaccuracy when they submitted the return. If they did, that would be deliberate, see CH81150 and CH81160. It is simply a question of examining what the person did or failed to do and asking whether a prudent and reasonable person would have done that or failed to do that in those circumstances.

Repeated inaccuracies may form part of a pattern of behaviour which suggests a lack of care by a person in developing adequate systems for the recording of transactions or preparing tax returns. It is, however, important to keep a sense of proportion. Repetition of the same inaccuracy would not always, of itself, indicate a failure to take reasonable care. If however a person becomes aware of the causes of an inaccuracy but after this nevertheless repeats the inaccuracy this may indicate deliberate behaviour in relation to those repetitions.

People do make mistakes. We do not expect perfection. We are simply seeking to establish whether the person has taken the care and attention that could be expected from a reasonable person taking reasonable care in similar circumstances, taking into account the ability and circumstances of the person in question at the time the irregularity was submitted to HMRC.

FA07/SCH24/PARA3 (1)(a)