I have seen some great articles on this recently for example âTips & Advice Taxâ (Indicator Issue 22 September 2012)
A few years ago the tax rules were updated and the government added one aimed at ensuring those who took âreasonable careâ in preparing their tax returns shouldnât be penalised if the return is incorrect.
But HMRC donât always remember the âreasonable careâ rule for example J R Hanson and HMRC (H and HMRC) as reported in âTips & Advice Taxâ Article HMRC overzealous on penalties.
H incorrectly applied a capital gains tax deduction he wasnât entitled too and was hit with penalty for ÂŁ14000, however, H used an accountant to prepare the returns and he had shown reasonable care so HMRC lost the case.
In addition under current rules HMRC could not pass the penalty to his accountant, so that means the accountants PI cover remains intact.
Here are some tips on how to show you have taken reasonable care:
1. You must supply your adviser with all the information that is relevant, donât hold back information
2. Check your tax return agrees with the information you supplied
3. Ask about entries you donât understand and keep records of the answers, you donât need to become an expert you just need to keep notes
There are cases where reasonable care hasnât been a successful defence for example Mr Waseem Shakoor v HMRC [2012] highlight by www.rossmartin.co.uk as they point out in the this case the taxpayer didnât follow the the 3 steps above and it was commented at the Tribunal that this was:
âa case of shutting oneâs eyes to what either was or ought reasonably to have been seen as incorrect advice â if, indeed, any such advice was actually given âa matter upon which we entertain significant doubt.â
steve@bicknells.net
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