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

Rowan failed to take reasonable care and understated tax by £20,000 on his return. He tells HMRC unprompted about the error. Using the standard penalty table, what is the range of the penalty HMRC may charge?

The penalty can range from £0 to £6,000. Careless errors carry a maximum penalty of 30% of the tax understated, and the minimum for unprompted disclosure is 0%. Thirty per cent of £20,000 is £6,000. The 15% minimum applies only to prompted disclosures.

  1. ABetween £0 and £6,000Correct
  2. BBetween £3,000 and £6,000
  3. CBetween £4,000 and £14,000
  4. DBetween £0 and £20,000

Explanation

Careless behaviour has a maximum penalty of 30% and a minimum of 0% for unprompted disclosure. 30% x £20,000 = £6,000, so the range is £0 to £6,000. The £3,000 lower bound uses the prompted 15% minimum, which is wrong for an unprompted disclosure.

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