Tax: why it pays to be organised

If your clients take reasonable care to get their tax right, HMRC will not penalise them - even if they make a mistake.

A new system of penalties for errors and omissions on tax returns has been introduced by HM Revenue & Customs (HMRC). Although the penalties themselves won't be levied until after 1 April 2009, you need to act now to help your clients get organised and avoid a potential penalty.

The new penalties system is designed to encourage compliance by determining the level of a penalty based on the taxpayer's behaviour. Under the new system, if your clients take reasonable care to get their tax returns right, they will not be charged a penalty if they make an error. This is clearly good news for the majority of taxpayers, who do their best to complete their tax returns correctly. After all, everyone makes mistakes.

However, many taxpayers remain unaware of the new penalties. At this early stage of the financial year, they still have time to act and minimise their exposure to the potential of a penalty after 1 April next year. So it's important that you talk to your clients about the penalties now and help them understand what is meant by reasonable care.

How to take reasonable care

Passing these tips from HMRC on to your clients will help them prove their business takes reasonable care - and avoid a potential penalty for errors:

  • keep accurate records and update them regularly
  • save records in case they are needed later
  • ask you (or HMRC) for help if they don't understand something 
  • don't wait for HMRC to tell them they need to pay tax - they should be proactive and find out
  • if they discover they've made an error, let HMRC know ASAP.


If your clients don't find it easy to keep their records organised, you may find that this is a further service you can offer them. Advising them to keep on top of their paperwork should also help them to avoid any potential penalties which could cause friction in your relationship with them.   

The new penalties will apply to VAT, PAYE, National Insurance, Capital Gains Tax, Income Tax, Corporation Tax and the Construction Industry Scheme. They will also apply to Self Assessment taxpayers.

They will apply to tax returns or other documents for periods starting on or after 1 April 2008, that are due to be filed on or after 1 April 2009.

Getting your knowledge on the new penalties up to date

HMRC has an e-learning module, available for tax agents and practitioners.

You can also find technical guidance in the HMRC Compliance Handbook Compliance Handbook.

If you have more specific questions, you can email the HMRC Penalties Team for help -