The Low Income Tax Reform Group (LITRG) was established in 1998 to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes. A new press release from the LITRG reminds taxpayers of their options when they receive a penalty notice from HMRC. If a taxpayer has made a genuine mistake, despite taking reasonable care, then no penalty should be due and the taxpayer can appeal against the penalty notice in question.

The press release stresses that '...where a tax return or other document submitted to them is incorrect, HMRC should only issue penalties in cases of careless or deliberate mistakes – not those where reasonable care was taken and certainly not without checking all the facts and circumstances behind the error.'

The inaccuracy penalty system was introduced to make penalties simpler to understand and more consistent across many taxes. The penalties can range from 0% where reasonable care is taken but nonetheless an incorrect return is submitted up to 100% of the tax where an error is deliberate and the taxpayer attempts to conceal it.

HMRC say that some of the ways you can take reasonable care include:

• keeping enough records to make accurate tax returns;
• keeping those records safe;
• asking HMRC or a tax adviser if you are not sure about anything, and following any advice you are given.

However, there is no clear definition of 'reasonable care' and HMRC is clear that their decision in part depends on an individual taxpayer's specific abilities and circumstances.