Penalties where agent is acting

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Owner-Managed Businesses

Guidance

Introduction

Under the penalty legislation introduced by FA 2007, Sch 24, where an inaccuracy has occurred on a return or other document which leads to an understatement of tax, the taxpayer is exposed to a penalty.

The rate of the penalty is based on the behaviour of the person and whether the disclosure of the error was prompted by HMRC. Once the rate has been calculated, this is then applied to the potential lost revenue (PLR), which is the extra tax due as a result of correcting the inaccuracy or under-assessment, in order to determine the amount of the penalty due.

The behaviour of the taxpayer is covered in more detail in the Calculating the penalty for inaccuracies in returns ― behaviour of the taxpayer guidance note. The PLR is discussed in the Calculating the penalty for inaccuracies ― potential lost revenue guidance note. The quality of the disclosure made to HMRC is covered in the Penalty reductions for inaccuracies guidance note.

Inaccuracies when an agent is acting

The taxpayer can be held liable

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Philip Rutherford

Senior Tax Director at Molson Coors Brewing Company

Phil is the Senior Tax Director for Molson Coors' European operations. He has responsibility for both direct and indirect taxes across both EU and non-EU states. Prior to this, Phil was responsible for Molson Coors UK tax affairs covering all major taxes and duties. Phil trained at KPMG LLP, where he worked for 8 years, specialising in tax investigations across both direct and indirect tax.

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