CH81142 - Types of inaccuracy: Examples of failure to take reasonable care
This guidance applies to returns and documents with a
filing date on or after 1 April 2009 where the return covers a tax
period beginning on or after 1 April 2008 seeCH81011for full details.
Example 1
Paul, a self-employed plumber, does not pay much attention to
his record-keeping responsibilities and has no structured system
for making sure that his records are accurate.
When Paul completes his income tax return he cannot be
certain that his figures are correct and is unable to check them.
This attitude towards record keeping indicates a lack of reasonable
care.
Example 2
Chandra, a shopkeeper decides to replace his old van with a new
vehicle. He buys an estate car so that he can use it for business
trips to his local cash and carry, and also uses the vehicle for
personal use in the evenings and weekends.
Chandra is not sure about what input tax he can claim for his
vehicle, but he doesn’t contact his accountant or HMRC for
advice, and wrongly claims all the input tax he paid on the car.
This indicates at least a lack of reasonable care.
Example 3
A&B Ltd, a large company with a substantial advertising
budget, does not have procedures to identify the entertaining
element of advertising costs. So any expenditure on advertising is
included in full in the advertising account, with no way of
cross-checking how much of the expense relates to disallowable
entertaining.
This would at least indicate failure to take reasonable care
and could be shown to be deliberate. A&B Ltd’s basic
systems and procedures are inadequate to give appropriate levels of
assurance.
Example 4
During an Employer Compliance review the compliance officer
advises Able Ltd that reimbursement of private phone bills should
be dealt with through the payroll and that PAYE and NICs must be
deducted accordingly.
When Able Ltd sends you its next end of year return you carry
out a review and discover that the company has not followed the
advice given by the compliance officer and the end of year return
is wrong as a result.
This indicates that Able Ltd has at least failed to take
reasonable care because it has ignored the advice given by
HMRC.
Example 5
On several consecutive VAT return periods Whizz Ltd tells you
after the end of the return period that the return was wrong and
gives you the correct figures.
Whizz Ltd’s systems are not adequate enough to produce
correct figures for the return by the end of the return period and
this repeated inaccuracy may be seen as at least a lack of
reasonable care.
