CH84540 - Penalties for inaccuracies: other penalty issues: agency -agent acting - person must still take reasonable care

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 onus is on the person to satisfy us that they took reasonable care to avoid inaccuracy. 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. No agent, for example, can produce correct accounts and returns from grossly deficient records, or give accurate advice if they do not have all the facts
  • 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. But they ought to be able to recognise the complete absence of a major transaction.

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 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 inaccuracy 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. Irrespective of the agent’s dishonesty, P’s behaviour will be determined by reference to the relevant facts, see CH84520.

Refer to CH800000 where you identify poor agent behaviour.

If a tax agent has been dishonest then refer to CH84520 to consider the person’s behaviour.

FA07/SCH24/PARA18