Guidelines on Penalties for Tax Inaccuracies and Suspension Conditions by WRA

WRA penalties for inaccurate tax documents: reasonable care and suspension

The Welsh Revenue Authority can charge a penalty if a tax document is inaccurate and this leads to too little devolved tax being shown, or a loss, repayment or tax credit being overstated. The main question is not just whether there was a mistake, but whether the taxpayer took reasonable care, was careless, or acted deliberately. If reasonable care was taken, there is no penalty. Careless penalties may sometimes be suspended, but deliberate penalties cannot be.

• No penalty is due if the taxpayer took reasonable care, judged by what a prudent person in their position would reasonably have done.
• Penalties can apply where an inaccuracy understates tax or wrongly increases a loss, repayment claim or tax credit claim.
• If a taxpayer later discovers an error, they should tell the WRA as soon as reasonably practicable, or the inaccuracy may then be treated as careless.
• Relying on a competent adviser, a reasonably arguable interpretation, or incorrect WRA advice may still amount to reasonable care if full and accurate facts were provided.
• Repeated similar mistakes may show poor systems and can suggest carelessness or, if the cause is known and ignored, deliberate behaviour.
• A careless penalty may be suspended for up to two years if the conditions are designed to prevent future errors; if the conditions are met, the suspended amount is cancelled.

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WRA penalties for inaccurate tax documents: reasonable care and suspension

This page explains when the Welsh Revenue Authority can charge a penalty because a document contains an inaccuracy, what “reasonable care” means, and when a careless inaccuracy penalty can be suspended. The key issue is not simply whether a mistake was made. It is whether the taxpayer took reasonable care, acted carelessly, or acted deliberately, and what they did once they discovered the problem.

What this rule is about

The rules deal with inaccuracies in documents given to the WRA which affect a devolved tax position. A penalty can arise if the inaccuracy causes too little tax to be shown as due, inflates a loss, inflates a repayment claim, or inflates a tax credit claim.

In practice, the legal question is behavioural as much as factual. The WRA is asking not only “Was the document wrong?” but also “Why was it wrong?” and “What level of care did the taxpayer take?”

This matters because:

• no penalty is due if reasonable care was taken
• careless behaviour can lead to a penalty, but suspension may be possible
• deliberate behaviour attracts higher penalties and cannot be suspended

What the official source says

A person is liable to a penalty if, because of careless or deliberate behaviour, they give the WRA a document containing an inaccuracy that leads to one of the following:

• an understatement of liability to a devolved tax
• a false or inflated statement of a loss relating to a devolved tax
• a false or inflated claim to repayment of devolved tax
• a false or inflated claim for a tax credit

An inaccuracy is careless if it results from a failure to take reasonable care. If reasonable care was taken, the inaccuracy is neither careless nor deliberate.

The source material sets out the following penalty ranges:

• reasonable care taken: no penalty, whether disclosure is prompted or unprompted
• careless: 0% to 30% for an unprompted disclosure, 15% to 30% for a prompted disclosure
• deliberate: 30% to 100% for an unprompted disclosure, 50% to 100% for a prompted disclosure

The amount is calculated by reference to the potential lost revenue.

The source also makes an important further point. A document may have been innocent when first submitted, but if the taxpayer later discovers the inaccuracy and does not take reasonable steps to tell the WRA as soon as reasonably practicable, the inaccuracy is then treated as careless.

What this means in practice

The mere existence of an error does not automatically mean a penalty is due. The practical starting point is to separate three situations:

• a genuine error despite reasonable care
• a careless error because enough care was not taken
• a deliberate error because the person knew the document was inaccurate, or knowingly failed to comply

The WRA says reasonable care means the behaviour of a prudent and reasonable person in that taxpayer’s position. That comes from the approach noted in the First-tier Tribunal decision in HMRC v David Collis. The point is practical: the standard is objective, but it is applied in context.

So the WRA will look at what the person actually did, what information they had, how complex the issue was, and what could reasonably have been expected from someone in that position.

The source makes clear that the same standard of knowledge is not expected from everyone. For example, the WRA would not usually expect the same level of expertise from an unrepresented individual as from a large multinational company. But everyone is still expected to take reasonable care for their own circumstances.

That means more complex or higher-risk matters usually require more checking. If a transaction clearly needed professional input and none was sought, that may point towards a lack of reasonable care.

The source also gives examples where a penalty might not be due because reasonable care was taken. These include:

• a reasonably arguable view that is later rejected
• a small arithmetic or transposition error that would not obviously stand out
• reliance on incorrect advice from the WRA, provided full facts were given when the advice was sought
• reliance on a competent adviser who was given full and accurate facts
• reliance on information from another person whose competence it was reasonable to trust, where the taxpayer could not realistically verify completeness and accuracy

Equally, repeated mistakes can matter. A pattern of repeated inaccuracies may suggest that the taxpayer’s systems are inadequate and that reasonable care was not taken. If the taxpayer knows what is causing the problem but continues anyway, later inaccuracies may indicate deliberate behaviour rather than mere carelessness.

How to analyse it

A sensible way to analyse a possible penalty is to work through the following questions.

• Was a document given to the WRA inaccurate?
• Did the inaccuracy affect the tax result in one of the ways covered by the rules, such as understating tax or inflating a repayment?
• When the document was submitted, did the taxpayer take reasonable care?
• If not, was the failure merely careless, or was the inaccuracy deliberate?
• If the taxpayer only discovered the error later, did they notify the WRA as soon as reasonably practicable?
• Was any disclosure unprompted or prompted?
• If the behaviour was careless, is suspension capable of helping prevent future penalties?

When considering reasonable care, the source points towards these practical factors:

• the taxpayer’s knowledge, abilities and circumstances
• the size and complexity of the issue
• whether the taxpayer checked the position properly
• whether appropriate professional advice was obtained where needed
• whether full and accurate facts were given to any adviser or to the WRA
• whether there is a pattern of similar errors

Example

Illustration: a taxpayer files a devolved tax return using advice from a competent adviser. The taxpayer gave the adviser all relevant facts, and the point involved a legal interpretation that was reasonably arguable. The WRA later disagrees with that interpretation. On the source material, that does not automatically mean the taxpayer failed to take reasonable care. A penalty may not be due.

By contrast, if a taxpayer notices after filing that a figure was wrong and that this reduced the tax due, but does nothing to tell the WRA for an extended period, the source says the inaccuracy can be treated as careless even if it was not careless when the document was first submitted.

Penalty suspension for careless inaccuracies

The WRA may suspend all or part of a penalty for a careless inaccuracy. This is not available for deliberate inaccuracies.

Suspension is only allowed where complying with the suspension condition or conditions will help the taxpayer avoid further penalties. So suspension is not simply a reward for cooperation. It must have a practical compliance purpose.

If the WRA suspends a penalty, it must issue a notice stating:

• what part of the penalty is suspended
• the suspension period, which cannot be more than two years
• the conditions the taxpayer must meet

The source says the WRA will set SMART conditions. In practical terms, the conditions should be:

• specific to the taxpayer or business
• measurable, so compliance can be evidenced
• achievable
• realistic in the taxpayer’s circumstances
• time bound

If the taxpayer shows that the conditions were met by the end of the suspension period, the suspended amount is cancelled.

If the WRA is not satisfied that the conditions were met, the suspended amount becomes payable, together with interest that would otherwise have run during the suspension period.

The suspended amount also becomes payable if, during the suspension period, the taxpayer incurs another penalty for giving the WRA a document containing a careless or deliberate inaccuracy.

Why this can be difficult in practice

The hardest issue is usually not whether the return was wrong, but whether the taxpayer’s behaviour fell below the standard of reasonable care.

That is a fact-sensitive judgement. The same mistake may be viewed differently depending on:

• how complex the transaction was
• what checks were carried out
• whether the taxpayer was professionally represented
• whether full information was passed to the adviser or to the WRA
• whether the result should have appeared obviously wrong

Another difficult area is reliance on others. The source recognises that reliance on a competent adviser, or on information from someone whose competence could reasonably be trusted, may be consistent with reasonable care. But that depends on the taxpayer having provided a full and accurate factual picture. If important facts were omitted, reliance on the advice may carry much less weight.

Repeated errors are also sensitive. A single mistake may be careless or even non-culpable. A series of similar mistakes may suggest weak systems, and if the cause is known but not corrected, later behaviour may be viewed as deliberate.

Finally, the obligation to act after discovering an error is easy to overlook. A taxpayer may think the original mistake was innocent, but the source makes clear that failing to inform the WRA promptly after discovery can itself turn the position into careless behaviour.

Key takeaways

• An inaccurate document does not by itself create a penalty; the key question is whether the taxpayer took reasonable care, acted carelessly, or acted deliberately.
• Reasonable care depends on what a prudent and reasonable person in that taxpayer’s position would have done, taking account of the taxpayer’s circumstances and the complexity of the issue.
• Only careless inaccuracy penalties can be suspended, and only where the suspension conditions are designed to help prevent future penalties.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidelines on Penalties for Tax Inaccuracies and Suspension Conditions by WRA

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