EM5102 - Penalties: culpability: establishing culpability

The first stage in establishing culpability involves seeking the evidence and establishing the relevant facts. As well as identifying any failures or understatements and quantifying the lost tax you must use your investigation skills to establish how and why the failure or inaccuracy occurred in order to correctly establish the behaviour.

You should not give an opinion about culpability until all the relevant facts have been gathered and you have ruled out the need for an evasion referral.

Culpability is not ‘established’ by simply asserting it at a meeting or in correspondence. It is established once

• the taxpayer acknowledges their default, or
• in the absence of such agreement, you have assembled a case to prove the default before the tribunal at an appeal hearing.

For failures the question is whether the taxpayer

• was allowed more time by an HMRC to meet the obligation, or
• had a reasonable excuse for the failure and remedied it without unreasonable delay once that obstacle was out of the way, see EM5105.

For inaccuracies the question is whether the taxpayer acted either:

• deliberately or carelessly where we have been given a return or other document containing an inaccuracy, and

• the return relates to a period beginning on or after 1 April 2008, and
• has a filing date on or after 1 April 2009, see CH80000 +

• or, for earlier offences: fraudulently, see EM5105, or negligently, see EM5125.