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ACCA Strategic Professional · Advanced Taxation (UK) · Appropriateness of planning measures to a taxpayer's circumstances and objectives

Marcus implemented a tax scheme that he knew was not supported by the law. He deliberately understated his income tax by £50,000 and also took steps to hide the evidence from HMRC. HMRC opened an enquiry and Marcus then disclosed the truth after being prompted. Based on the standard penalty table for errors, what is the minimum penalty that can apply?

The minimum penalty is £25,000. Deliberate and concealed behaviour attracts a minimum of 50% of the tax understated where the disclosure is prompted. Applying 50% to £50,000 gives £25,000, so the lower unprompted rate of 30% does not apply.

  1. A£10,000
  2. B£17,500
  3. C£25,000Correct
  4. D£15,000

Explanation

Deliberate and concealed behaviour has a maximum penalty of 100%, a minimum of 30% for unprompted disclosure and a minimum of 50% for prompted disclosure. Marcus's disclosure was prompted, so the minimum is 50% × £50,000 = £25,000. £15,000 is the unprompted minimum (30%). £17,500 is the minimum for deliberate but not concealed behaviour with prompted disclosure (35%).

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