'Take care to avoid a penalty'

HMRC have published a new leaflet, 'Take care to avoid a penalty', which they suggest (in their latest Agent update) advisers could give to clients. That would mean obtaining bulk copies of the leaflets and they don't tell us how or where we could do this. Shame.

In practice I imagine that many accountants and tax advisers will instead prefer to replicate the content of the leaflet in their own newsletters and articles on their websites. That's been the approach that many have adopted in the past - however well written have been HMRC (and previously Inland Revenue) leaflets.

Is the current leaflet comparable with any of those that have gone before? Previous leaflets have contained 'guidance' which we might have thought was too biased towards the Revenue's perspective. Also we will have wanted to evidence the fact that WE, the advisers, were providing advice rather than simply encouraging clients to read copies of HMRC leaflets.

I just wonder whether the new penalty regime warrants a distinctive approach. Yes, we could all replicate HMRC guidance and supplement this with insights and advice. But will this have the same impact on clients?

Before you dismiss the idea out of hand, do reflect for a moment on the SIGNIFICANT changes that are addressed by the new leaflet. Will clients take more notice of yet another letter or article written by their adviser or to the messages direct from HMRC contained in this leaflet?

Here's an extract:

If you take reasonable care to get it right, we will not charge a penalty if you make an error. Some of the ways you can show you took reasonable care are:
• keeping accurate records, which you regularly update, to make sure your tax returns are correct
• saving your records in case you need them later
• checking what the correct position is when you don’t understand something, or seeking advice from us or a tax professional
• telling us promptly about any error you discover after you send us a tax return or document

If you are not yet already familiar with the new penalty regime, you should be aware that it is effectively already in place. This leaflet contains a useful outline. If I were still in practice I think I would send copies of HMRC leaflet together with a brief covering letter. In this letter I would emphasise the MAJOR shift in the way penalties are to be charged in future. If a client is able to to show that they took 'reasonable care' (over and above appointing the adviser) then, if any mistakes occur, any penalties may be reduced to zero. That wasn't the position in the past and it's not simply a change in Revenue practice. It's the law.

If you think this through theere is another clear implication of these changes. I've seen it suggested that if a client is facing a 30% penalty for failure to take reasonable care, the accountant may be pressurised (or volunteer?) to say to the client: "Blame us and the penalty will be reduced to nil!"

I suspect that the potential for such accusations will serve to increase the number of negligence claims being made against accountants if, in the future, a client suffers a 30% penalty.

What are your thoughts about the impact of the new penalty regime? Please add your comments to this post.