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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Penalties: Culpability - Defences: “Innocent Error”: Responses

Arithmetical or transcription error

We all make occasional errors so the important thing is to consider why it was made. Unless it is exceptionally serious, or indicates a more underlying problem the isolated nature of this nature error would call for substantial abatement of the penalty.

A taxpayer cannot return a source of income of which he is unaware. This will only happen in unusual circumstances. A bank account might have been opened in their name when they were children.

If you are satisfied that the source was not known to taxpayer, and could not have been brought to light by any reasonable action on their part, you must accept that the omission was innocent.

If the error is in a return form and it is claimed they didn’t know the source was chargeable you will want to know whether they took the trouble to read the form and the notes supplied with it. What steps were taken to ensure that the entries were correct and complete EM4800+.

‘Forgotten’ Income

A taxpayer should keep sufficient records to enable him to complete his tax return and any omission or understatement arising from a failure to do so must be regarded as negligent.

Lost Records

If the taxpayer genuinely loses his records and cannot replace them, he should explain what has happened and ‘do his best’ EM5175. In such circumstances, although the loss of the records probably involved a measure of negligence on the taxpayer, a genuine mistake by the taxpayer, made in good faith, must be regarded as an innocent error.