A deliberate inaccuracy is also “concealed” when the person makes arrangements to hide it, for example by producing false evidence to support an inaccurate figure. It attracts the highest standard inaccuracy penalty, up to 100% of the extra tax, with minimums of 50% for a prompted disclosure and 30% for an unprompted one. Simply hoping HMRC will not notice a deliberate error is not concealment; there has to be some active step to cover it up.

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What does the law require for a concealed inaccuracy?

Paragraph 3(1)(c) of Schedule 24 to the Finance Act 2007 says an inaccuracy is “deliberate and concealed” if it is deliberate on the person’s part and the person makes arrangements to conceal it. The statute gives one example in brackets: “submitting false evidence in support of an inaccurate figure”.

That means HMRC has two things to establish. First, the inaccuracy must be deliberate, meaning the person knew the document was wrong when they gave it to HMRC (see what counts as deliberate behaviour). Second, there must be arrangements to conceal it. If HMRC can show the first but not the second, the inaccuracy is “deliberate but not concealed”, which carries a lower penalty range.

HMRC’s Compliance Handbook at CH81160 calls this “the most serious level of evasion”. It says that as well as deliberately recording an inaccuracy, the person has to take active steps to cover their tracks, either before or after the document is sent to HMRC.

What counts as concealment?

CH81160 lists acts of concealment HMRC looks for. They include:

  • creating false invoices to support inaccurate figures in the return;
  • backdating or postdating contracts or invoices;
  • creating false minutes, or minutes of meetings that never happened;
  • destroying books and records so that they are not available;
  • systematically diverting takings into undisclosed bank accounts and covering the traces;
  • routing invoices through an offshore company that does nothing, leaving profits untaxed there;
  • recording sales below their true value with the balance paid separately;
  • describing private spending in the business records as business spending, sometimes with the supplier changing the invoice description;
  • altering genuine purchase invoices to inflate them;
  • compiling false accounts to support agricultural or business relief from inheritance tax.

HMRC’s factsheet CC/FS7a gives the plain example of creating a false invoice to cover a stock purchase that never happened.

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How does HMRC tell concealed and not concealed cases apart?

HMRC’s paired examples show where the line falls. At CH81151, Sarah takes £50 a week from her takings as pocket money and leaves it out of her records, so the turnover on her return is knowingly wrong. That is deliberate, but there is no evidence of false records to hide it. At CH81161, Paolo does exactly the same but, during a compliance check, produces invoices he has made up to support his takings figure. Preparing and handing over those invoices is concealment.

Likewise, Imran at CH81151 inflates his input tax on a VAT return and hopes it will not be checked. That is deliberate but not concealed. Michael at CH81161 does the same and also creates a false purchase invoice and puts it in his records to make the figure look credible. That is deliberate and concealed.

Other concealed examples at CH81161 include a hairdresser who explains undeclared bank interest with a fabricated letter about a gift from her aunt, and an executor who alters a deed of gift to suggest a lifetime gift was made more than seven years before death.

Can concealment happen after the return is filed?

Yes. CH81160 says the active steps can be taken before or after the document is sent. Paolo and the hairdresser only produced their false documents once HMRC started asking questions. A person who made a deliberate error but then fabricates evidence during an enquiry moves from the 70% range to the 100% range. This is one reason advisers urge clients never to produce reconstructed documents without saying clearly that they are reconstructions.

How large is the penalty?

Paragraph 4 of Schedule 24 sets the maximum penalty as a percentage of the potential lost revenue, which paragraph 5 defines as the extra tax due once the inaccuracy is corrected. Paragraph 10 sets the floors for disclosure.

Behaviour Maximum Minimum, prompted Minimum, unprompted
Careless 30% 15% 0%
Deliberate but not concealed 70% 35% 20%
Deliberate and concealed 100% 50% 30%

These are the category 1 rates. Where the error involves an offshore matter and the tax is income tax, capital gains tax or inheritance tax, paragraph 4 raises the maximum for a deliberate and concealed inaccuracy to 150% in category 2 and 200% in category 3. See offshore penalties.

Within the range, CC/FS7a explains that HMRC gives credit for telling (up to 30%), helping (up to 40%) and giving access to records (up to 30%). If you take a long time to disclose, for example 3 years or more, HMRC will usually restrict the reduction to 10 percentage points above the minimum. Our guide to penalty reductions for disclosure covers this in detail.

Illustration only. HMRC finds £10,000 of extra tax hidden behind false invoices, so the disclosure is prompted and the range is 50% to 100%. The person then gives some help and earns a 50% quality reduction. HMRC takes half of the 50 point gap off the maximum, giving 75%, so the penalty is £7,500. Had there been no false invoices, the same help would give 52.5% of a 35% to 70% range, or £5,250.

Who has to prove concealment?

HMRC does. CH81180 tells officers it is for them to show, from the evidence, that a document contains a careless or deliberate inaccuracy, and CH81190 says the standard is the balance of probabilities but that the quality of evidence should be higher for more serious behaviour. In practice HMRC needs evidence of the concealing act itself, such as the false invoice, the altered deed or the hidden account, and not just the underlying error.

What else follows from a concealed finding?

  • No suspension. Only careless penalties can be suspended (CH83142).
  • Longer time limits. Deliberate behaviour lets HMRC assess income tax and capital gains tax up to 20 years after the tax year under section 36(1A) of the Taxes Management Act 1970, and VAT up to 20 years after the period under section 77(4) of the VAT Act 1994.
  • Company officers. Under paragraph 19, a director, manager or secretary can be made to pay part or all of a company’s deliberate penalty. See company officers’ liability for penalties.
  • Publication and monitoring. HMRC may publish details of deliberate defaulters where the potential lost revenue exceeds £50,000 under section 94 of the Finance Act 2009, and CC/FS7a says it may place deliberate defaulters under its managing serious defaulters programme.
  • Criminal investigation. CH81160 notes that HMRC refers the most serious cases for consideration of criminal proceedings.

Third parties are covered too. Paragraph 1A charges a penalty of up to 100% on someone who deliberately supplies false information to, or withholds information from, a taxpayer so that the taxpayer’s return is wrong. See penalties for third parties.

What mistakes do people make?

  • Treating silence as concealment. Not owning up is not, on its own, an arrangement to conceal; HMRC’s own examples treat “hoping it will not be checked” as deliberate but not concealed.
  • Creating documents during an enquiry to “tidy up” records. Anything made after the event that looks like an original can turn a 70% case into a 100% case.
  • Assuming the disclosure reductions are lost. Even in a concealed case, telling, helping and giving access can bring a prompted penalty down towards 50%.
  • Forgetting that the company’s penalty can follow a director personally.

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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.