HMRC proposes new rules for correcting old tax return errors
UKPulse Money Desk
HMRC has issued a consultation on 'Modernising the Correction of Errors', which includes a proposal requiring taxpayers to correct inaccuracies in submitted tax documents.
- HMRC's new proposal would require taxpayers to correct inaccuracies in tax returns or other submitted documents if they become aware of them.
- The proposal could lead to taxpayers being treated as having engaged in deliberate behaviour for assessment and penalty purposes if they fail to correct an error, even if the initial error was not deliberate.
- The new rules may shift the burden of proof from HMRC to taxpayers in certain circumstances regarding careless or deliberate behaviour.
HMRC has issued a consultation document titled 'Modernising the Correction of Errors', which includes a proposal that would require taxpayers to correct inaccuracies in tax returns or other documents they have submitted. Fiona Fernie, a partner at Blick Rothenberg, highlights that this could mean small errors from years ago might need to be addressed.
Under the proposed rules, taxpayers who discover errors in documents up to 20 years old could face disputes with HMRC if they disagree on whether corrections are necessary. If a taxpayer discovers an error five years after filing a return and believes HMRC is out of time to assess additional tax, they might decide no correction is required.
However, HMRC could later conclude the original error was careless. Under the new legislation, a failure to correct the error could be treated as deliberate behaviour for assessment time limit and penalty purposes, even if the initial error was not deliberate. This proposal could represent a shift in the burden of proof, as it is usually for HMRC to prove careless or deliberate behaviour.
Why this matters: The proposal could lead to disputes between taxpayers and HMRC over historic errors and potentially shift the burden of proof regarding careless or deliberate behaviour onto taxpayers.
What this means for you: If you discover an error in old tax documents, you may be required to correct it, potentially risking a dispute with HMRC and penalties if not addressed.