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The harmonised penalty regime applies where a person gives HMRC a document containing an inaccuracy (see A4.532 for the meaning of document and inaccuracy in this context) leading to one of the following¹:

1. Ìý

   (a)ÌýÌýÌýÌý an understatement of liability to tax

2. Ìý

   (b)ÌýÌýÌýÌý a false or inflated claim to a loss

3. Ìý

   (c)ÌýÌýÌýÌý a false of inflated claim to repayment of tax

and the inaccuracy was careless or deliberate on that person's part. Third party penalties and those imposed where a taxpayer fails to notify HMRC of an under-assessment are discussed below.

Errors which have no tax consequences, such as a mistake over an address, cannot be the subject to a penalty as they do not meet the above definition of an inaccuracy from which a tax error arises.

A penalty cannot be imposed unless HMRC can show that the inaccuracy in the document resulted from a degree of culpability on the part of the taxpayer. There are three degrees of culpability:

1. Ìý

   •ÌýÌýÌýÌý deliberate conduct with an arrangement to conceal