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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Penalties: Incorrect Returns, Accounts etc: Approach

This guidance applies to returns with a filing date on or before 31 March 2009.

Guidance for returns and other documents with a filing date on or after 1 April 2009, where the return relates to a tax period beginning on or after 1 April 2008, is contained in CH80000+.

The taxpayer is responsible for the accuracy of his/her return. If a return is incorrect, you should find out the reason for the error to establish whether or not the return was submitted fraudulently or negligently EM5100+. You can seek a penalty in a negotiated settlement only where culpability is established or accepted.

It will normally be straightforward to establish that SAI details or accounts which understate the receipts or overstate the deductions have been prepared at least negligently (and any material discrepancies should be apparent to the taxpayer) or have been based on records which have been kept at least negligently.

For SA years, a person can amend their return. That amendment can be made at any time before the end of the period of 12 months beginning with the filing date. But penalties can still apply if it can be shown that the original return was submitted fraudulently or negligently.

Every person served with a statutory return form is under an obligation to supply the particulars required by the form and is supplied with notes which are intended to assist in the completion of the form. Similarly, every person given the opportunity to complete a non-statutory return form receives explanatory notes. Each return must be certified by the taxpayer to be correct and complete to the best of their knowledge. The taxpayer is clearly under an obligation to take the necessary trouble to read carefully both the form and the notes.

If, then, the taxpayer omits certain items of income or understates any income, by more than can be accounted for by genuine errors or honest misunderstanding, it can be said (except in the case of a very ignorant or simple-minded person) that the taxpayer in question could not have had an honest belief in the truth or accuracy of the return and must be guilty of at least negligence.

The taxpayer cannot delegate responsibility for their returns and must to sign them personally. A plea that errors or omissions are due to poor work by an accountant should normally be rejected and the taxpayer should be asked why an incorrect return was signed and what checks were applied personally. The choice of an incompetent accountant may be deliberate and may indicate an intention to deceive both the accountant and HMRC.