Records made at the time showing what you believed, such as emails to your accountant, working papers and notes of advice. Anything that shows openness, such as an explanation in the additional information box of the return. An open, explained departure is hard to square with an intention to mislead. Witness evidence about your state of mind when the return was filed. In Campbell, an inference drawn from an email sent after the relevant periods was not good evidence of what the taxpayer intended earlier. Evidence of the reasons for the error, for example a system fault, unclear guidance or reliance on an adviser. See evidence and witness statements at the tax tribunal.

Challenging HMRC's finding of deliberate behaviour

Q: Why is a deliberate finding worth fighting?

The label changes far more than the penalty percentage. Penalty range. Under paragraph 4 of Schedule 24 to the Finance Act 2007, the standard maximum is 70% of the potential lost revenue for deliberate behaviour, 100% if concealed, against 30% for carelessness. Paragraph 10 sets the prompted minimum at 35% or 50%, compared with 15% for careless errors. Time limits. For income tax and capital gains tax, section 34 of the Taxes Management Act 1970 allows 4 years, section 36(1) allows 6 years for carelessness, and section 36(1A) allows 20 years for a loss brought about deliberately. For VAT, CH53300 confirms carelessness does not extend the period at all, while section 77(4) of the VAT Act 1994 allows 20 years for deliberate behaviour. No suspension. CH83142 says HMRC cannot suspend a penalty for a deliberate inaccuracy under any circumstances. Personal exposure. Paragraph 19 lets HMRC pass part or all of a company's deliberate penalty to an officer, and section 94 of the Finance Act 2009 allows publication where the potential lost revenue exceeds £50,000.

If HMRC says your error was deliberate, it is HMRC that has to prove it, on the balance of probabilities, by showing you actually knew the return was wrong (or deliberately shut your eyes to it). You can dispute the finding during the check, then appeal the penalty within 30 days, ask for a review and take the case to the tax tribunal, which can replace a deliberate penalty with a careless one. Getting the label changed can also defeat an old assessment that only stands because of the 20 year deliberate time limit.

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Why is a deliberate finding worth fighting?

The label changes far more than the penalty percentage.

Penalty range. Under paragraph 4 of Schedule 24 to the Finance Act 2007, the standard maximum is 70% of the potential lost revenue for deliberate behaviour, 100% if concealed, against 30% for carelessness. Paragraph 10 sets the prompted minimum at 35% or 50%, compared with 15% for careless errors.
Time limits. For income tax and capital gains tax, section 34 of the Taxes Management Act 1970 allows 4 years, section 36(1) allows 6 years for carelessness, and section 36(1A) allows 20 years for a loss brought about deliberately. For VAT, CH53300 confirms carelessness does not extend the period at all, while section 77(4) of the VAT Act 1994 allows 20 years for deliberate behaviour.
No suspension. CH83142 says HMRC cannot suspend a penalty for a deliberate inaccuracy under any circumstances.
Personal exposure. Paragraph 19 lets HMRC pass part or all of a company’s deliberate penalty to an officer, and section 94 of the Finance Act 2009 allows publication where the potential lost revenue exceeds £50,000.

Who has to prove that the error was deliberate?

HMRC. Its own guidance at CH81180 tells officers that it is for them to show, from the evidence, that a document contains a careless or deliberate inaccuracy. CH81190 sets the standard as the balance of probabilities, but adds that the quality of evidence should be higher for more serious behaviour. In Campbell v HMRC [2023] UKUT 00265 (TCC), at paragraph 115, the Upper Tribunal said HMRC must establish to the normal civil standard that the act or omission was intentional.

The same applies to time limits. In Danapal v HMRC [2023] UKUT 00086 (TCC) it was common ground that the burden of proving that assessments were validly made within the time limits rests with HMRC, and HMRC accepted that it had to prove the deliberate behaviour. The Upper Tribunal also stressed that allegations of dishonesty must be pleaded with full particularity and put to the witness, and held it was clearly wrong for the First tier Tribunal to make findings of dishonesty against the taxpayer’s former accountants when HMRC had never alleged it. See our guide to the burden of proof in tax appeals.

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What exactly does HMRC have to show?

The tribunals apply a subjective test: did this taxpayer knowingly give HMRC a document containing an error, intending HMRC to rely on it as accurate? The Upper Tribunal in CPR Commercials Ltd v HMRC [2023] UKUT 00061 (TCC) accepted that blind eye knowledge also counts, where the taxpayer had a firmly grounded suspicion and deliberately chose not to check. The Supreme Court in HMRC v Tooth [2021] UKSC 17 described a deliberate inaccuracy as one made with an intention to mislead HMRC about the truth of the statement. The full test is explained in what counts as deliberate behaviour.

The cases also show what does not meet the test, which is where most challenges succeed:

a finding that you “should have known” is not enough (Campbell, paragraph 118);
a finding that you “cannot have reasonably concluded” something shows carelessness, not knowledge (CPR Commercials, paragraph 39);
a finding that you were “at least reckless” was not treated as a finding of actual or blind eye knowledge (CPR Commercials), and the Upper Tribunal left open whether recklessness is ever enough.

How do you dispute it during the compliance check?

CH81180 tells officers not to discuss the seriousness of the behaviour until all the facts are established, and then to explain why they have concluded the inaccuracy was careless or deliberate and invite your comments. That is the moment to put your account in writing, with documents.

HMRC’s factsheet CC/FS7a lists your rights when penalties are being considered: you have the right not to answer questions asked to help decide a penalty, the amount of help you give is up to you, you may want professional advice before answering, and you can appeal. Bear in mind that help also earns disclosure reductions, so silence has a cost. CC/FS7a also says HMRC will write to explain the penalty and how it was worked out before issuing a penalty assessment or inviting a contract settlement.

How do you appeal the penalty?

Paragraph 15 of Schedule 24 gives a right of appeal against the decision that a penalty is payable and against its amount. Paragraph 16 treats the appeal like an appeal against an assessment to the tax concerned, including the rules on HMRC review and the First tier Tribunal, but you do not have to pay the penalty before the appeal is decided. GOV.UK guidance says you usually have 30 days from the date the penalty was issued to appeal. For direct taxes HMRC will offer a review if it does not change its decision; for VAT the decision letter offers a review and you have 30 days to accept it or go to the tribunal. See HMRC statutory review and the tax tribunal and writing grounds of appeal.

Paragraph 17 says the tribunal may affirm or cancel HMRC’s decision that a penalty is payable, and on the amount it may affirm or substitute any decision HMRC had power to make. In CPR Commercials the Upper Tribunal used that power to replace the deliberate penalties with careless ones.

What evidence helps?

Records made at the time showing what you believed, such as emails to your accountant, working papers and notes of advice.
Anything that shows openness, such as an explanation in the additional information box of the return. An open, explained departure is hard to square with an intention to mislead.
Witness evidence about your state of mind when the return was filed. In Campbell, an inference drawn from an email sent after the relevant periods was not good evidence of what the taxpayer intended earlier.
Evidence of the reasons for the error, for example a system fault, unclear guidance or reliance on an adviser.

See evidence and witness statements at the tax tribunal.

How does this affect an old tax assessment?

Section 34(2) of the Taxes Management Act 1970 says an objection that the time limit has expired can only be raised on an appeal against the assessment, so the time limit point must be argued in the tax appeal itself, not just the penalty appeal.

Illustration only. In October 2026 HMRC assesses extra income tax for 2016 to 2017, more than 9 years after that tax year ended. The only limit long enough is the 20 year deliberate limit. If the tribunal finds the error was careless rather than deliberate, the 6 year limit applies, the assessment is out of time and the tax is not due. A finding of careless rather than deliberate in a more recent year would still leave the tax in place but cut the penalty range.

What mistakes do people make?

Accepting a deliberate label in exchange for a quick settlement without weighing the time limit and publication consequences.
Arguing only that reasonable care was taken. Often the stronger and more realistic argument is that the error was careless but not deliberate.
Making informal admissions in meetings that are later used as evidence of knowledge.
Missing the 30 day appeal deadline. GOV.UK guidance says you will then need to give a reason; see late appeals to HMRC.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.

Challenging HMRC’s finding of deliberate behaviour