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

Priya, a UK-resident individual, submitted a self-assessment return that understated her tax by £20,000 because she was careless in recording her rental income. HMRC had not contacted her. She later told HMRC about the error voluntarily and gave full co-operation. Based on the standard penalty table for errors, what is the minimum penalty that can apply?

The minimum penalty is £0. A careless error that is disclosed on an unprompted basis carries a minimum penalty of 0% of the tax understated. Priya told HMRC before any contact, so with full co-operation the penalty can be reduced to nil.

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

Explanation

For careless behaviour the minimum penalty for an unprompted disclosure is 0%, and the maximum is 30%. Priya's disclosure was unprompted because HMRC had not contacted her, so with full co-operation the penalty can be reduced to nil. £3,000 is the 15% prompted minimum, and £6,000 is the 30% maximum.

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