“ (1) For the purposes of a penalty under paragraph 1, inaccuracy in a document given by P to HMRC is – (a) “careless” if the inaccuracy is due to failure by P to take reasonable care … ” 15. Paragraph 18 deals with the liability of a taxpayer to penalties under the schedule where agents are acting on behalf of the taxpayer. It provides as follows in so far as relevant: “ (1) P is liable under paragraph 1(1)(a) where a document which contains a careless inaccuracy (within the meaning of paragraph 3) is given to HMRC on P’s behalf. … (3) Despite sub-paragraphs (1) and (2), P is not liable to a penalty under paragraph 1 or 2 in respect of anything done or omitted by P’s agent where P satisfies HMRC that P took reasonable care to avoid inaccuracy (in relation to paragraph 1)… ” 16. Neither party drew my attention to paragraph 18 in their submissions. During the course of the hearing I therefore invited submissions in relation to the effect of that paragraph in the circumstances of the present case. Mr Arthur for the appellant relied on paragraph 18(3) . 17. Miss Shields made no submissions specifically in relation to paragraph 18 . She did however rely on a decision of the First-tier Tribunal in Heaney-Irving v HMRC TC01619 . That case was concerned with whether a taxpayer who relied on his accountant to file a self-assessment return had a reasonable excuse such that the taxpayer should not be liable to a penalty undersection 93 Taxes Management Act 1970 . The tribunal judge in that case referred to a number of other decisions of the First-tier Tribunal to the effect that reliance on a third party to file a return or to make a payment of tax on time can be a reasonable excuse but must involve something exceptional. 18. I do not consider that the meaning of reasonable excuse in the context of a failure to make a return or make a payment of tax gives any real assistance in construing Para 18 Schedule 24Finance Act 2007 . Paragraph 18 is specifically dealing with the reasonableness of reliance on a third party agent whose act or omission causes an inaccuracy in a return. It is plainly directed towards those professional advisers who assist taxpayers in completing their tax returns and documents associated therewith. In those circumstances the focus of whether a taxpayer has taken reasonable care will be whether he was reasonably entitled to rely upon his adviser, and what steps the taxpayer himself might reasonably be expected to take given that he has instructed a professional adviser. 19. In my view carelessness can be equated with “negligent conduct” in the context of discovery assessments undersection 29 Taxes Management Act 1970 . In that context, negligent conduct is to be judged by reference to the reasonable taxpayer. The test was described by Judge Berner in Anderson (deceased) v Revenue and Customs Commissioners[2009] UKFTT 206 at [22], cited with approval by the Upper Tribunal in Colin Moore v Revenue and Customs Commissioners[2011] UKUT 239 (TCC) : “ The test to be applied, in my view, is to consider what a reasonable taxpayer, exercising reasonable diligence in the completion and submission of the return, would have done. ” 20. I am satisfied that the effect of paragraph 18 is to remove the liability of a taxpayer to a penalty where: (1) a return is completed and lodged by an agent, and (2) an inaccuracy in the return is the result of something done or omitted by the agent, but (3) the taxpayer took reasonable care to avoid that inaccuracy. 21. What is reasonable care in any particular case will depend on all the circumstances. In my view this will include the nature of the matters being dealt with in the return, the identity and experience of the agent, the experience of the taxpayer and the nature of the professional relationship between the taxpayer and the agent. In my view, if a taxpayer reasonably relies on a reputable accountant for advice in relation to the content of his tax return then he will not be liable to a penalty under Schedule 24 . 22. I am fortified in these conclusions in relation to paragraph 18 by the content of the HMRC Compliance Handbook at CH84540 which states in relation to paragraph 18 as follows: “ A person cannot simply appoint an agent and deny responsibility for their tax affairs. The person still has a duty to take reasonable care, within their ability and competence, to make sure that what they are signing for is correct. The person has to show that they took reasonable care, within their ability and competence, to avoid default by their agent. This will include · making sure that they give the agent all relevant information with which to work ... · implementing the professional advice received, and not neglecting some vital step · checking the agent’s work to the extent that the person is able to do so. For example, an ordinary person cannot be expected to challenge specialist professional advice on a complex legal point. But they ought to be able to recognise the complete absence of a major transaction. A person saying and meaning ‘I leave it all to my agent’ is hardly taking care, let alone reasonable care, over their obligations or the work of their agent. ... The person has an obligation to choose an adviser who is trained and competent for the task in hand ... The benchmark is a person who goes to an apparently competent professional adviser · gives the adviser a full and accurate set of facts · checks the adviser’s work or advice to the best of their ability and competence and · adopts it. The person will then have taken reasonable care to avoid inaccuracy on the part of themselves and their agent. ” 23. At one extreme is an error of omission, for example failing to declare a source of income. In those circumstances it seems to me that a taxpayer will almost always be expected to identify the error. At the other extreme an error might involve wrongly construing a complex piece of legislation. In those circumstances the possibility of a penalty may still arise because of the carelessness of the agent, but the taxpayer’s liability to a penalty might well be excluded on the basis that he took reasonable care but did not identify the error. 24. I agree with the general thrust of the guidance given in the HMRC Compliance Handbook. In particular that a taxpayer cannot simply leave everything to his agent. A taxpayer must certainly satisfy himself that the agent has not made any obvious error. That might involve the taxpayer seeking to understand the basis upon which an entry on his return has been made by the agent. However in matters that would not be straightforward to a reasonable taxpayer and where advice from an agent has been sought which is ostensibly within the agent’s area of competence, the taxpayer is entitled to rely upon that advice. At the heart of this issue is the extent to which a taxpayer is required to satisfy himself that the advice he has received from a professional adviser is correct. The answer to that will depend on the particular circumstances of the case. 25. Paragraphs 4-8 Schedule 24 deal with the amount of the penalty which is set by reference to the “ potential lost revenue ”
“ (a) telling HMRC about it (b) giving HMRC reasonable help in quantifying the inaccuracy ... and, (c) allowing HMRC access to records for the purpose of ensuring that the inaccuracy ... is fully corrected ” 27. Paragraphs 9 and 10 also distinguish between a prompted disclosure and an unprompted disclosure. For present purposes it is not disputed that the disclosure given by the appellant was prompted. In those circumstances HMRC must reduce the standard penalty of 30% “ to one that reflects the quality of the disclosure ”