Ask an expert: Carelessness and the new penalty regime

Question

My clients’ trading company is currently under investigation by HMRC for the year ended 31 December 2011. It appears that the previous adviser included the entertaining expenses in the marketing costs and did not add them back in the tax computation. HMRC has stated that it can revisit the earlier years back to the accounting period ended 31 December 2009 when this first started and will charge the company penalties on the basis it was careless. The clients informed me that they were not aware that there was anything wrong and followed the advice of their former accountant. I have highlighted to my clients that HMRC is correct regarding the adjustments required to the 2009 2010 and 2011 accounting periods; however I agree with the clients that it seems harsh...