HMRC’s decision not to suspend a penalty for a careless tax return error was flawed based on judicial review principles.

HM Revenue and Customs (HMRC) opened an enquiry into the appellant’s tax return for 2013/14. The appellant accepted that he made an error by omitting to disclose employment income from the return, following a misunderstanding about his requirement to disclose the income, due to the fact that he had been non-UK resident for a number of years, and believed that he was already paying “the correct amount of tax” (i.e. he thought that as his PAYE income had been taxed at source, he did not need to include it on his return).

HMRC subsequently issued a closure notice increasing the appellant’s tax liability in respect of the error, and also issued a penalty assessment on the basis that the appellant’s behaviour was careless. The appellant appealed. He contended that the error arose