An error in a return is careless when the transaction to which it relates is unusual and requires “special attention.” The suspension provisions cannot apply when the error relates to a “one-off” return.

Anthony Fane had received a stock payment from his employer, producing income tax of £40,000 for a single month. As that amount was more than his gross salary in that month, his employer advanced him £30,000.  This was later deducted from a termination payment he received.  Mr Fane wrongly believed that deduction was for PAYE and completed his Tax return accordingly.

HMRC charged a penalty for Careless behaviour and refused to suspend the applicable penalty.  Mr Fane made an appeal to the Tax Tribunal.

The judge said that as the transaction was unusual, Mr Fane should have paid extra attention and, if unsure, taken professional advice.  Although the error was innocent, it was careless.  The judge also said the taxman correctly refused to suspend the penalty. The key feature of the suspension provisions is that suspension should help the taxpayer avoid becoming liable for further Careless inaccuracy penalties.

It seems that a taxpayer who makes a one-off Careless error cannot avoid a penalty, but a taxpayer who makes a careless error and poses a risk of repeating the error in future can avoid a penalty via the suspension provisions.

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