Taxpayer successfully argues against “deliberate behaviour” penalty
When it comes to tax penalties, there is a behaviour-based scale that means you pay more for knowingly understating your tax bill than if you make a simple mistake. Unfortunately, HMRC is often over-zealous to apply a “deliberate” tag. Why is this a problem and how did one taxpayer successfully argue against it?

There's a largely harmonised penalty regime for inaccuracies across different taxes, including income tax. Broadly:
- a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
- the error is deliberate, the penalty will be between 20% and 70% of the extra tax due
- the error is deliberate and concealed, the penalty will be between 30% and 100% of the extra tax due.
However, this isn’t the end of the matter - the behaviour also determines how far back HMRC can issue an assessment for. The ordinary time limit is four years, but if the behaviour is careless this increases to six years. If the inaccuracy arises due to deliberate behaviour (which can include negligence), the time limit is 20 years. HMRC seems to argue that most errors are at least careless, but in some cases it tries to go one step further, as Mr Collier (C) found out.
C had genuine conditions that affected his ability to read, and so he relied heavily on an accountant to submit his personal and partnership returns. There were some omissions following the accountant suffering a family tragedy, which HMRC picked up after a long investigation, and raised assessments and penalties on the basis of “deliberate” behaviour. C didn’t dispute the assessments for the tax, but argued that the behaviour was careless, not deliberate so the assessments (which were issued more than six years after the end of the relevant year) were out of time. The Tribunal’s view was that C had not acted in a reckless way, and there were genuine reasons for the omissions. HMRC had not met the burden of proof required, and C’s appeal was allowed.
Related Topics
-
Late payment interest to be cut
A cut to the Bank of England base rate means there will be another reduction in HMRC's penalty interest rates. What are the new charges and when will they take effect?
-
Opt out of winter fuel payments by 15 September
HMRC has issued new guidance on the winter fuel payments. What do you need to know?
-
Change to IHT on pensions proposals
HMRC has published a policy statement announcing an important change to its plans to include pension savings in an individual's estate for inheritance tax (IHT) purposes. What’s the full story?