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ACCA Strategic Professional · Advanced Taxation (UK) · Tax advantages and disadvantages of alternative courses of action

Marlow Ltd, a VAT registered trader, discovered that a previous VAT return understated VAT due by £20,000 because of carelessness. It told HMRC voluntarily before HMRC raised any enquiry (unprompted disclosure). Using the standard error penalty table in the ACCA Finance Act 2025 tax tables, what is the range of penalty HMRC could charge?

The penalty range is £0 to £6,000. For careless errors the maximum penalty is 30% of the £20,000 underpaid, being £6,000, and the minimum with unprompted disclosure is 0%. The prompted disclosure minimum of 15% does not apply here.

  1. A£0 to £6,000Correct
  2. B£3,000 to £6,000
  3. C£0 to £14,000
  4. D£4,000 to £20,000

Explanation

For careless behaviour the maximum penalty is 30% and the minimum is 0% with unprompted disclosure. 30% x £20,000 = £6,000, so the range is £0 to £6,000. £3,000 to £6,000 wrongly uses the prompted minimum of 15% (£3,000 is 15%).

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