‘Deliberate’ errors

Errors, time limits, and penalties

The normal time limit for HMRC to issue assessments is (usually) four years from the end of the tax year. This is increased to six years for ‘careless behaviour’ and to 20 years for ‘deliberate behaviour’ (see TMA 1970, s 34 and s 36). Careless or deliberate behaviour may also result in HMRC imposing higher penalties, as well as prompting other HMRC interventions.

In 2021 the Supreme Court clarified that HMRC needed to show deliberate behaviour specifically in respect of the inaccuracy of a statement, but left open the question as to what type of knowledge a taxpayer needed to have in order to be acting deliberately [ HMRC v Tooth [2021] UKSC 17]. Wherever HMRC asserts that there has been a careless or deliberate error, advice is needed on:

• how the process of an HMRC. officer making a discovery differs from the making of an enquiry into a self assessment tax return

• Whether, a ‘discovery’ has been made by an officer,

• The circumstances in which a self-assessment may be considered to involve a deliberate inaccuracy, and clarification of the three-step test adopted by HMRC with regard to deliberate inaccuracies, namely:

1. Identification of the inaccuracy

2. The evidence that the accuracy was intentional

3. The causal link between the inaccuracy and the insufficiency of tax.