Tax Tribunal: what is carelessness?

A taxpayer will incur a tax penalty if an error is made in a return as a result of carelessness.

Carelessness is akin to negligence; but negligence has now been rebranded as carelessness to fit HMRC’s new tax penalty regime. Keith Gordon, barrister, reported this tax case examining negligence and self-assessment in January’s Tax Adviser magazine. 

In Anderson (Deceased) v. HMRC [2009] UKFTT 258 (TC) a taxpayer took out two single premium bonds. When she surrendered them she claimed the attaching tax credit via her self-assessment return. It transpired that only one bond was a UK bond, so a tax credit did not apply to the other one. The judge found that a reasonable taxpayer, exercising reasonable diligence in the completion and submission of his tax return would have been aware of the nature of the bonds from the policy documentation. If not then he would have taken reasonable steps to find out such information. 

The conclusion; if you chose to invest in a financial product the Trubunal will assume that you will also take the trouble to find out how to tax it too. If in doubt, ask and certainly never make a guess. 

Tax-tip: with the Self-Assessment filing deadline fast approaching if there is a lack of certainly about figures entered onto a tax return, do not get into a panic if you are running out of time. Simply tick the estimates box and note in the white space that you need to re-check your advice and then submit the return. Make enquiries and ensure that you have the correct treatment and make any amendment later, if necessary.