How Your Behaviour Could Cost You Thousands with HMRC

It's not always about the numbers!

When it comes to Tax, it is not always just about the numbers. HMRC is just as concerned with how you behave and cooperate with them.

Error on your tax return? What are you going to do?

Let's say you make a rather substantial error on your tax return. What do you do about it? Do you immediately resolve the situation? Do you say “I'll deal with that another day”? Or do you turn a blind eye and hope it disappears?

Recent tribunal decisions show that, situations such as making mistakes on tax returns, or failing to declare income/gains, are judged not only by how much loss to the revenue is at stake, but also by what steps you as the taxpayer made either to ensure accuracy or to resolve any failures.

Making the wrong move (or not making any moves) can be the deciding factor as to whether HMRC impose additional financial penalties or even have the legal ability to investigate your records from the previous 20 years.

Two recent cases in the First Tier Tax Tribunal highlight the importance of this perfectly: Witton [2026] TC 09793 and Uzoh [2026] TC 09775

What ‘behaviours' determine what outcome?

There are generally three categories of behaviour which HMRC can assess you on:

1. Reasonable Care
2. Careless but non-deliberate
3. Deliberate (either concealed or not concealed)

 It is whichever category you fall into that can determine:

1. The level of penalties they can charge on you; and
2. How far back into your tax history they can investigate, if they decided to.

Taking reasonable care

Reasonable care is not about perfection. It is about taking sensible steps to check and substantiate your tax position. A reasonable taxpayer generally will:

• Keep accurate records of income, expenses, and deductions.
• Check figures and reconcile accounts before submitting a return.
• Seek guidance from HMRC manuals, legislation, or official guidance where appropriate.
• Consult a professional advisor when unsure, and follow up if advice is unclear.
• Act promptly if an error is discovered, notifying HMRC rather than ignoring it.

Failing to take these steps can leave a taxpayer exposed, even if there was no intention to mislead.

Careless behaviour

A loss of tax or a situation is treated as brought about carelessly if the person fails to take reasonable care to avoid it.

This is an objective test based on what a reasonable and prudent person would have done in the same circumstances.

This differs from deliberate behaviour, which is subjective and requires HMRC to show what the taxpayer actually knew.

Case: Uzoh [2026] TC 09775

• Mr Uzoh claimed employment expenses using a digital tax app service.  
• HMRC challenged some claims, arguing they were not valid.

The tribunal found:

• The taxpayer should have queried the content and validity of the claims before making them, rather than simply relying on the third-party advisor.

Even without intending to deceive, the taxpayer was found to have acted carelessly because he failed to take reasonable care to avoid the error. HMRC could issue penalties and recover unpaid tax.

Usually appointing an adviser can help argue that reasonable care has been taken. However, if you do not raise appropriate queries or check your documents properly, such as in this case, this could result in an unfavourable outcome.  

Deliberate behaviour

Deliberate behaviour is considered when a loss of tax arises because a person knowingly provides inaccurate information or intentionally ignores the risk of an error. The bar for this is generally very high.

HMRC must prove that the taxpayer either knew the information was wrong or “consciously avoided” confirming its accuracy.

Case: Witton [2026] TC 09793.

• Mr Witton had worked first as self-employed and later as a director of a financial services company.
• HMRC claimed he deliberately under-declared his income and that his employer had wilfully failed to operate PAYE.
• They attempted to recover all unpaid tax and penalties from him personally going back to 2006.

The tribunal found:

• He relied on his accountant and his employer’s finance department. He was not responsible for payroll or finance.
• His income fluctuated widely, making it difficult to reconcile bank deposits with his gross turnover.
• He had no formal contract or payslips for his director period and assumed that any salary received was taxed.
• Simply failing to submit tax returns does not prove deliberate behaviour.

Because HMRC could not show that he had acted deliberately, their discovery assessments were out of time and penalties could not stand.

Co-operation with HMRC

Ultimately, regardless of how HMRC characterises any behaviour, the more cooperative you are, the more likely any consequences will be mitigated. This can be achieved by:

• Prompt disclosure – informing us (and HMRC where appropriate) about any failures or inaccuracies as soon as possible.
• Full detail – providing clear and accurate information about the extent of the failure or inaccuracy.
• Responsive engagement – answering questions thoroughly and in a timely manner.

That said, while transparency is essential, there is a balance to be struck. Providing excessive or unrelated information can inadvertently create further questions or issues, if everything has been done correctly in the past. The key is to be open and accurate, but focus on supplying what is relevant and requested rather than volunteering extraneous details.

Protecting Yourself

So what can you do to protect yourself from future penalties or assessments?

• Document everything: keep records of calculations, communications, and professional advice.
• Ask questions: never assume someone else is handling your obligations correctly.
• Act promptly: don’t ignore it, inform HMRC if you do discover errors.
• Seek professional advice: specialist guidance can make the difference between being considered careless or deliberate.

Bottom Line

Your behaviour matters just as much as the numbers on your tax return. Taking reasonable care, being proactive, and seeking guidance can protect you from penalties and potentially decades of back taxes. Cases like Witton and Uzoh show that how you act is central to your risk with HMRC.

If there is a problem, can I deal with HMRC myself?

Dealing with HMRC alone can sometimes be risky, and time consuming. Even small errors or missteps in how you explain a situation can lead to penalties, interest or pro-longed investigations.

So whilst you can do this yourself, using an adviser such as ETC Tax can:

• Reduce risk – ensuring disclosures and responses are accurate and proportionate.
• Protect you from unnecessary penalties – using an adviser can show co-operation and help demonstrate reasonable care in the eyes of HMRC.
• Provide clarity – guiding you on what to say, when to say it, and what to document.

Next steps

Tax is tricky, and a lot of the time HMRC refer to complex legislation, which is better in the hands of a trained eye.

If you are worried about your HMRC position, please do not hesitate to get in touch with one of the team.