With the deadline for submission of 2007/8 tax returns now eight weeks away, clients are reminded that a new tax penalty regime was introduced on 1 April 2008. One interesting aspect of the new regime (though one which we anticipate will not often be seen) is that HM Revenue and Customs (HMRC) now accept that an incorrect return can be submitted even though reasonable care has been taken when completing it. In this circumstance, where the taxpayer discovers the error and tells HMRC about it, there is at least the chance that no penalty will be assessed. However, where HMRC discover the error, it will be regarded as carelessness on the part of the taxpayer.

Given the complexity of the UK tax system – where the skill is not in completing the return, but in knowing what the right figure to enter into the box might be – this is a very reasonable approach. However, that is more or less the end of the good news.

HMRC’s guidance makes it clear that they believe it is reasonable for a person ‘who encounters a transaction or other event with which they are not familiar’ to check the correct tax treatment or take suitable advice from a professional and that failing to do so may constitute carelessness.

The main thrust of the new regime is to apply a greater level of penalty to those who deliberately conceal taxable income or gains rather than those who merely make an innocent error.

HMRC are taking active steps to obtain information about bank accounts and investments held abroad by British residents and have indicated that a robust approach will be taken where these provide evidence of failure to declare taxable income. They are also intending to look at the tax disclosures of people who have  'buy to let' mortgages and who have brought substantial sums into the UK from abroad.