RSTP3025 - Meaning of reasonable care for penalties

RSTPA guidance on the meaning of ‘reasonable care’ in terms of penalties under RSTP3011, RSTP3018 and RSTP3019.

A careless inaccuracy in the context of a penalty for either:

  • giving us a particular type of document containing a careless inaccuracy (see RSTP3011); or
  • providing information or producing a document to us (in compliance with an information notice) which contains a careless inaccuracy (see RSTP3018),

is an inaccuracy which is due to a failure by you to take reasonable care.

A careless failure in the context of a penalty for failing to comply with a relevant requirement imposed by or under section 22 or 23 of the LT(S)A 2014 (see RSTP3019) is a failure which is due to you failing to take reasonable care.

‘Reasonable care’ can best be defined as the behaviour of a prudent and reasonable person in the position of the person in question.

We recognise that people do make mistakes and we do not expect perfection. In determining whether or not you have failed to take reasonable care, we are simply seeking to establish whether you have taken the care and attention that could be expected from a reasonable person taking reasonable care in similar circumstances.

For reasonable care to apply there must be no question, for example, about whether or not you knew about an inaccuracy when you provided the information or document to us or failed to comply with the relevant requirement. If you did know about the inaccuracy when you provided the information to us or failed to comply with the relevant requirement, that would be a deliberate inaccuracy or deliberate failure for the purposes of determining the penalty.

In determining whether or not in our view you failed to take reasonable care we will examine what you did (or did not do), and will consider whether a prudent and reasonable person would have done (or not done) that in those circumstances. Although we expect every person to take reasonable care, we cannot determine whether or not you have done so without considering your abilities and circumstances.

For example, we would not ordinarily expect the same level of knowledge or expertise from a self-employed un-represented individual as we do from a large multinational company. We would expect a higher degree of care to be taken over large and complex matters than simple straightforward ones. And we would expect taxpayers to take appropriate professional advice where necessary.

Repeated inaccuracies or failures to comply may, for example, form part of a pattern of behaviour which suggests a lack of care by you in developing adequate systems for the recording of transactions or preparing tax returns.

Repetition of the same inaccuracy or failure would not always, of itself, indicate a failure to take reasonable care. If however you become aware of the causes of an inaccuracy or failure but after this nevertheless repeat the inaccuracy or failure this may indicate deliberate behaviour on your part in relation to those repetitions.

Examples of when a penalty might not be due (because you did take reasonable care) include:

  • a reasonably arguable view of situations that is subsequently not upheld;
  • an arithmetical or transposition inaccuracy that is not so large either in absolute terms or relative to your overall tax liability, as to produce an obviously odd result or be picked up by a quality check;
  • you taking action which leads to the inaccuracy or failure following advice from us that later proves to be wrong, provided that all the details and circumstances were given by you to us when the advice was sought;
  • you acting on advice from a competent adviser which proves to be wrong despite the fact that the adviser was given a full set of the accurate facts; and
  • you accepting and using information from another person whose competence you could reasonably expect to rely on but where it is not possible to check that the information is accurate and complete.

RSTPA 2014 section 182

RSTPA 2014 section 197

RSTPA 2014 section 209

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