Taxpayer successfully argues against “deliberate behaviour” penalty
When it comes to tax penalties, there is a behaviour-based scale that means you pay more for knowingly understating your tax bill than if you make a simple mistake. Unfortunately, HMRC is often over-zealous to apply a “deliberate” tag. Why is this a problem and how did one taxpayer successfully argue against it?
There's a largely harmonised penalty regime for inaccuracies across different taxes, including income tax. Broadly:
- a penalty arises because of a lack of reasonable care, the penalty will be between 0% and 30% of the extra tax due
- the error is deliberate, the penalty will be between 20% and 70% of the extra tax due
- the error is deliberate and concealed, the penalty will be between 30% and 100% of the extra tax due.
However, this isn’t the end of the matter - the behaviour also determines how far back HMRC can issue an assessment for. The ordinary time limit is four years, but if the behaviour is careless this increases to six years. If the inaccuracy arises due to deliberate behaviour (which can include negligence), the time limit is 20 years. HMRC seems to argue that most errors are at least careless, but in some cases it tries to go one step further, as Mr Collier (C) found out.
C had genuine conditions that affected his ability to read, and so he relied heavily on an accountant to submit his personal and partnership returns. There were some omissions following the accountant suffering a family tragedy, which HMRC picked up after a long investigation, and raised assessments and penalties on the basis of “deliberate” behaviour. C didn’t dispute the assessments for the tax, but argued that the behaviour was careless, not deliberate so the assessments (which were issued more than six years after the end of the relevant year) were out of time. The Tribunal’s view was that C had not acted in a reckless way, and there were genuine reasons for the omissions. HMRC had not met the burden of proof required, and C’s appeal was allowed.
Related Topics
-
Who can't yet sign up for MTD IT?
Making Tax Digital for Income Tax (MTD IT) becomes mandatory from April 2026 for sole traders and landlords with qualifying income over £50,000. However, HMRC’s current guidance makes clear that not everyone can sign up yet. If you are preparing early, are you actually eligible?
-
MONTHLY FOCUS - PROFIT EXTRACTION PLANNING AHEAD OF 5 APRIL 2026
The end of the 2025/26 tax year is fast approaching. In this Monthly Focus we look at ways to get money out of your company tax efficiently, and consider whether limited is still the way to go for your business.
-
HMRC updates advisory fuel rates from 1 March 2026
HMRC has published the latest advisory fuel and electric rates (AFRs) for company cars, effective from 1 March 2026. Several rates have changed since the previous quarter. What should employers be aware of?

This website uses both its own and third-party cookies to analyze our services and navigation on our website in order to improve its contents (analytical purposes: measure visits and sources of web traffic). The legal basis is the consent of the user, except in the case of basic cookies, which are essential to navigate this website.