ECSH82830 | Sanctions for non-compliance: financial penalties: financial penalties framework: definition of careless

Careless contraventions can be best explained by an extract taken from the First-tier Tribunal decision in HMRC v David Collis where Judge Berner said:

“That penalty applies if the inaccuracy in the relevant document is due to a failure on the part of the taxpayer (or other person giving the document) to take reasonable care. We consider that the standard by which this falls to be judged is that of a prudent and reasonable taxpayer in the position of the taxpayer in question.”

The law defines ‘careless’ as a failure to take reasonable care.

The courts find that reasonable care is best defined as the behaviour which is that of a prudent and reasonable person in the position of the person in question. This means examining what the person did or failed to do and deciding whether a prudent and reasonable person would have done that or failed to do that in those circumstances.

Each person has a responsibility to take reasonable care, but ‘reasonable care’ needs to take into account that person’s abilities and circumstances.

In considering whether ‘reasonable care’ has been taken, the test is simply one of ‘reasonableness’. No other measure should be used when measuring ‘reasonable care’. It should be measured only as an assessment of whether the action taken was ‘reasonable’.

An example might be where a business has risk assessments (RAs) and policies, controls and procedures (PCPs) in place but has failed to follow the PCPs in some cases (see ECSH33200). The decision maker (DM) should consider carefully whether the business’s act was careless or deliberate and what sanctions are appropriate for the contraventions.

What might be considered unreasonable in one case, may not be unreasonable in another, depending on the circumstances. The DM needs to consider the facts of each case. The burden is on the person to satisfy the DM that they took reasonable care to comply with their obligations under The Money Laundering, Terrorist Financing and Transfer of funds (Information on the Payer) Regulations 2017.