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Application of tax-geared penalties

07 May 2019 / Suzie Moore
Issue: 4694 / Categories: Comment & Analysis
Forensic challenge

Key points

  • HMRC is pushing the boundaries between reasonable care carelessness and deliberate behaviour.
  • Evidence of advice received by the taxpayer may be called for before HMRC closes an enquiry.
  • Advice from accountants is not privileged.
  • Taxpayers can choose to waive legal advice privilege but should review carefully whether to do so.
  • It is not always enough to rely on advice from a competent tax adviser.

Finance Act 2007 Sch 24 is a behaviour based regime for the imposition of tax-geared penalties. The incidence and quantification of the penalty will depend on:

  • the level of culpability of the taxpayer for the inaccuracy: careless deliberate but not concealed deliberate and concealed;
  • whether the disclosure is prompted or unprompted; and
  • the existence of reductions for disclosure including telling HMRC about the inaccuracy giving HMRC help to quantify the inaccuracy and allowing HMRC access to records.

The focus of the regime from HMRC’s perspective is to reward what...

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