Suspended penalties for inaccuracies in returns

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Owner-Managed Businesses

Guidance

Background

Under the penalty legislation introduced by FA 2007, Sch 24, where an inaccuracy has occurred on a return or other document which leads to an understatement of tax, the taxpayer is exposed to a penalty.

The rate of the penalty is based on the behaviour of the person and whether the disclosure of the error was prompted by HMRC. If a business has formed a VAT group then the representative member is treated as the person, for purposes of applying the penalty regime.

Once the rate has been determined, this is then applied to the potential lost revenue (PLR), which is the extra tax due as a result of correcting the inaccuracy or under-assessment, in order to calculate the amount of the penalty due.

The behaviour of the taxpayer is covered in more detail in the Calculating the penalty for inaccuracies in returns ― behaviour of the taxpayer guidance note. The PLR is discussed in the Calculating the penalty

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Philip Rutherford

Senior Tax Director at Molson Coors Brewing Company

Phil is the Senior Tax Director for Molson Coors' European operations. He has responsibility for both direct and indirect taxes across both EU and non-EU states. Prior to this, Phil was responsible for Molson Coors UK tax affairs covering all major taxes and duties. Phil trained at KPMG LLP, where he worked for 8 years, specialising in tax investigations across both direct and indirect tax.

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