Rebel without a causal link: HMRC’s position on proving carelessness

Everyone makes mistakes but when it comes to your tax position a ‘careless’ mistake can have serious consequences. If HMRC can show that a loss of tax was ‘brought about carelessly’ they can use the extended six-year time limit under TMA 1970 s 36 to issue a discovery assessment. A loss of tax will be ‘brought about carelessly’ by a person ‘if that person fails to take reasonable care to avoid bringing about that situation’ (TMA 1970 s 118(5)). Similarly if an inaccuracy in a document given to HMRC is due to a failure to take reasonable care HMRC can issue a penalty under FA 2007 Sch 24.

‘Carelessness’ is therefore a key concept within UK tax legislation. It is well established that ‘reasonable care’ is assessed by reference to what a reasonable and prudent taxpayer would objectively have done in the circumstances ...