Special Measures businesses face deemed carelessness penalties on errors

A large business that is subject to a Special Measures Notice or a Confirmation Notice faces a stricter penalty position when a document it gives to HMRC contains an inaccuracy.GOV For penalties for errors under Schedule 24 to the Finance Act 2007, the inaccuracy is treated as being due to a failure to take reasonable care where either of two conditions is met.

The first condition is that the error relates to a tax avoidance scheme the business entered into while under the Notice. The second is that the error is at least partly attributable to a speculative interpretation of UK tax law, judged at the time the document was given to HMRC. A speculative position is an interpretation of UK tax law that a court or tribunal would be likely to reject, meaning it carries less than a 50% chance of successGOV; the business need not actually have deployed the interpretation before a court or tribunal for it to count as speculative.

Where either condition is met, HMRC treats the inaccuracy as a failure to take reasonable care.GOV That deeming does not add an automatic penalty on top of every case: where the inaccuracy is deliberate, where the business in fact failed to take reasonable care, or where another provision of law already treats the inaccuracy as a failure to take reasonable care, HMRC does not apply an automatic failure-to-take-reasonable-care penalty and instead assesses the penalty that fits the nature of the inaccuracy.GOV

The sanctions apply from the date the business becomes subject to the Special Measures Notice or the Confirmation NoticeGOV, and the penalties are assessed under Part 3 of Schedule 24GOV. The legal basis is paragraphs 47 to 48 of Part 3 of Schedule 19 to the Finance Act 2016 and paragraph 13 of Part 3 of Schedule 24 to the Finance Act 2007.GOV