HMRC’s internal guidance in relation to the penalty behaviours is contained within the Compliance Handbook. Section CH81130 is titled: Penalties for Inaccuracies: Types of inaccuracy: Inaccuracy despite taking reasonable care.
The guidance in this section states “Where an inaccuracy in a document has been made despite the person having taken reasonable care to get things right, no penalty will be due”. The guidance goes on to provide examples of situations where a penalty would not be due. These include “acting on advice from a competent adviser which proves to be wrong despite the fact that the adviser was given a full set of accurate facts”, and a link is provided to section CH84530
Section CH84530 advises that in cases where an agent such as a tax accountant is acting on a person’s behalf, the officer should focus on the behaviours of the persons whose return or document is inaccurate. The implication here is that the behaviours under review are those of the taxpayer (your client) not you, the agent, acting on their behalf.
On the basis that your client gave you all of the information required to prepare the VAT return and partial exemption calculation, their behaviour in this case, requesting their competent adviser to prepare their VAT return, does not demonstrate careless behaviour, and the HMRC penalty assessment should be challenged.
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