Instability regarding the HMRC’s use of ‘reasonable care’ criterion

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The Chartered Institute of Taxation and Association of Tax Technicians, conducted a survey, which revealed that members have serious concerns about the HMRC’s tendency to treat taxpayers’ errors as failure to take reasonable care and is inconsistent in its approach.
The two organisations intended to capture the views of their members on HMRC’s existing enforcement regime six years after it was introduced. The most questionable of these powers is the system of ‘behavioural penalties’.

One of the key questions in the survey was how often the HMRC treated client errors as ‘a failure to take reasonable care’. Around half of the responders said that this happened in more than half the cases, and almost a quarter said that the HMRC behaved like this in over three-quarters of all cases. A number of members commented that the HMRC are too ready to conclude that there had been a failure to take reasonable care, rather than a misunderstanding, human error or a memory lapse.

Some finance experts who reviewed the survey, stated that it seemed as though officers had purposefully set the penalties higher than they should, just to set a more favourable starting point during the negotiations with the agent of the taxpayer. Several comments and complaints were received regarding HMRC compliance checks, where they were asking for unnecessary information.