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

Ravi deliberately omitted £40,000 of rental income from his tax return and took steps to hide it from HMRC. He has an additional tax liability of £10,000 as a result. HMRC discovers the omission and Ravi makes a prompted disclosure with full cooperation. Using the standard penalty table, what is the minimum penalty that can apply?

The minimum penalty is £5,000. Ravi's behaviour is deliberate and concealed, and for prompted disclosure the minimum penalty is 50% of the extra tax. Fifty percent of £10,000 gives £5,000. The 30% unprompted minimum or the 100% maximum would not apply here.

  1. A£1,500
  2. B£3,500
  3. C£5,000Correct
  4. D£10,000

Explanation

The behaviour is deliberate and concealed. The table gives a minimum penalty of 50% for prompted disclosure. 50% x £10,000 = £5,000. £3,000 would be 30%, the unprompted minimum, and £10,000 is the 100% maximum.

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