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ACCA Strategic Professional · Advanced Taxation (UK) · Income tax: property and investment income

Ms Green submitted her self-assessment return with an error in her rental income caused by carelessness. Understatement of tax was £8,000. HMRC opened an enquiry and she made a prompted disclosure, giving full help. Using the standard penalties for errors table, what is the minimum penalty HMRC can charge?

The minimum penalty is £1,200. For careless errors, the minimum penalty with prompted disclosure is 15% of the tax understated, and 15% of £8,000 gives £1,200. A zero penalty is only possible with an unprompted disclosure, and £2,400 is the maximum.

  1. A£0
  2. B£1,200Correct
  3. C£2,400
  4. D£4,000

Explanation

Careless behaviour has a maximum of 30% and a minimum of 15% for prompted disclosure. Minimum penalty is 15% x £8,000 = £1,200. £0 would be the minimum only for an unprompted disclosure, and £2,400 is the maximum 30%.

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