SolvedEM4504 | Penalties: Introduction: Two Types of Penalty Offences
From HM Revenue & Customs · Enquiry Manual
Every offence that attracts a penalty falls into one of two types; Failure or Error. The distinction is important because each type has its own conditions.
(i) Failure offences
The most common examples here are
failure to notify liability - e.g. TMA70/S7(8); FA98/SCH18/PARA2; FA08/SCH41/PARA6
failure to deliver a return, by the filing date, or at all - e.g. TMA70/S93; FA98/SCH18/PARA17 and 18
failure to comply with an information notice - e.g. TMA70/S97AA; FA98/SCH18/PARA29; TMA70/S98(1); FA08/SCH36/PARA39, 40 and 50.
All failure penalties can be successfully appealed (or not imposed in the first place) if the taxpayer can demonstrate that they
had a reasonable excuse for the failure and
remedied the failure without unreasonable delay after the excuse had ended.
(ii) Error offences
The most common example here is
Fraudulently or negligently delivering an incorrect return - e.g. TMA70/S95; FA98/SCH18/PARA20.
Simply delivering an incorrect return does not incur a penalty.
All error penalties require that the taxpayer committed the error fraudulently or negligently.
Fraud involves a deliberate intent to deceive. Negligence on the other hand does not imply any deliberate intent: it is simply a lack of reasonable care. However, the taxpayer has to have been negligent; negligence by an agent, alone, does not bring the taxpayer an error penalty.
This summary of error offences and the guidance at EM4800-4830 inclusive does not apply where the error (inaccuracy) is in a return or other document that
relates to a tax period beginning on or after 1 April 2008, and
has a filing date on or after 1 April 2009.