Penalties for inaccurate declarations

​Most people take reasonable care when dealing with their tax affairs, but if you make an inaccurate declaration you may have to pay a penalty.

The level of penalty will depend on a number of factors, including:

• whether you told us about the inaccuracy
• whether your inaccuracy was careless or deliberate
• how much you cooperate with us

When a penalty may be payable

You may have to pay a penalty if you don’t take reasonable care when giving any document or information to Revenue Jersey. Information can be given to us in a number of ways including:

The inaccuracy must be in respect of income tax. A penalty might be payable if you carelessly or deliberately:

• omit or understate your income
• overstate a claim for an allowance, deduction, or relief
• provide other inaccurate information that has a bearing on your tax liability

Reasonable care

We won’t charge a penalty if you’ve taken reasonable care.

What reasonable care means

Taking reasonable care means doing all you can to make sure you declaration is correct.

We’ll take into account your personal circumstances and abilities.

If you take reasonable care, but still make an error, we won’t generally charge a penalty.

The standard of reasonable care doesn’t require perfection. But it does mean giving appropriately serious attention to your tax affairs. It also means keeping accurate records.

Careless behaviour

We’ll consider you careless if you haven’t taken reasonable care with your tax affairs. A person won’t be aware they’ve made an error when giving the information. If they were aware, that would be deliberate behaviour.

Deliberate behaviour

A person engages in deliberate behaviour when they give information they know is inaccurate. It is more than being careless. It’s about doing something in the knowledge it is wrong.

Some examples of deliberate behaviour would include:

• knowingly entering an income figure on a tax return that is lower than the actual figure
• overstating an amount for a claim for an allowance or relief when the applicant is aware, or unsure, if they are entitled to claim
• an employer purposefully under-declaring a deduction made from an employee, because the employer does not have sufficient funds to pay the ITIS debt for that month

​Repeated errors

An increased penalty is available when the same person, who has already received a penalty in the past five years, makes a second or further inaccurate declaration. The five year period refers to five calendar years, rather than years of assessment.

The maximum penalty can be increased, as shown below:

​If you have a tax agent

If you have a tax agent, it’s still your responsibility to make sure you give them accurate and complete information. You are also required to give reasonable attention to any document your tax agent asks you to sign.

Examples of careless behaviour

Being careless in your tax affairs means you haven’t taken reasonable care. Here are some examples of careless behaviour.

Example 1

When preparing her tax return, Claire accidentally claimed a small number of expenses for her business, which were actually in relation to personal expenditure. This is because she kept all of her receipts in the same place, regardless of whether they were personal or business receipts.

We will charge Claire a penalty in this case because the error would not have happened if she had taken care to keep her receipts separately, or if she had checked the receipts before making a claim.

Example 2

On his tax return, James declares his net rental income as £205 rather than £2,005. The resulting tax bill is £470 lower than it should have been.

Since James’s correct tax bill is £800, the error resulted in a proportionately large reduction in his tax bill, meaning it is unlikely we would accept that James took reasonable care in completing his tax return.

Example 3

As an electrician who runs his own small business, Graham works long hours during the week, and works over most weekends. He also has a young family.

When submitting his tax return, Graham forgets to enter his bank interest. After being challenged, he claims that he forgot because he is always extremely busy.

Although it is clear that Graham has a demanding work and home life, these are not circumstances that are unique to him, and do not warrant special treatment. Graham knows he is busy, so he must devote adequate time to his tax affairs, or seek professional advice.

Examples of deliberate behaviour

The penalties for deliberate behaviour are higher than for careless behaviour. Deliberate behaviour is when someone does something knowing it’s wrong.

Example 1

Nicola works full-time in an office and pays to put her son in nursery during the week. She received a certificate from the nursery that showed that she had paid the nursery more than she actually did.

Even though Nicole knows the certificate is wrong, she makes a claim on her tax return. In this case, she will be liable to a deliberate penalty.

Example 2

Craig runs a window cleaning business, and is registered for GST. Some important customers have not paid their accounts for some time, so Craig’s business is short of cash.

When completing his GST return, Craig decides to put in an expenses claim that actually relates to personal expenditure. Since Craig has acted intentionally, he would need to pay a deliberate penalty.

Example 3

A tax agent writes to advise a client that she will shortly receive a distribution from a trust.

When completing the client’s income tax return, the agent does not include the distribution. When questioned, the agent claims that the client’s view was the payments were by loan.

The circumstantial evidence suggests the client knew the distributions were income in nature, rather than loan, because her agent did not mention in the letter anything about the terms of repayment, nor of any interest to be paid.

The surrounding evidence indicates the client was acting deliberately.