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

Zara submitted a tax return that understated her income because she failed to take reasonable care. HMRC opened an enquiry and she then disclosed the error only after being prompted by HMRC. Using the standard penalty table for errors in returns, what is the range of penalty percentages (of potential lost revenue) that can apply?

Careless errors carry a maximum penalty of 30% of potential lost revenue. If the taxpayer discloses only after HMRC prompting, the minimum is 15%. The range is therefore 15% to 30%; the 0% minimum applies only to unprompted disclosure.

  1. A0% to 30%
  2. B15% to 30%Correct
  3. C35% to 70%
  4. D50% to 100%

Explanation

Careless behaviour carries a maximum penalty of 30%. Where disclosure is prompted, the minimum is 15%. The range is therefore 15% to 30%. The 0% minimum applies only where the disclosure is unprompted.

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