‘No penalties’ for innocent tax errors
THE boss of HM Revenue & Customs (HMRC) has told MPs there are “no penalties for innocent errors”, as he was quizzed on the tax furore surrounding Nadhim Zahawi.
HMRC chief executive Jim Harra, appearing before the Public Accounts Committee where he was due to discuss tax compliance and the pandemic, was pressed on some of the questions surrounding the tax arrangements for the embattled Conservative Party chairman.
Prime Minister Rishi Sunak has ordered an investigation by Sir Laurie Magnus, his independent adviser on ministers’ interests, into whether Mr Zahawi broke ministerial rules over the estimated £4.8 million bill he settled with HMRC while he was Chancellor.
It came after the Guardian reported that Mr Zahawi had paid a penalty as part of the dispute.
Downing Street subsequently suggested Mr Sunak did not know last week that Mr Zahawi had paid the reportedly 30% penalty to HMRC.
Mr Harra was at pains to stress that he could not comment on individual cases, but did tell MPs that penalties are not applied for what he termed “innocent” tax mistakes.
On Thursday, Mr Harra told MPs: “Carelessness is a concept in tax law. It can be relevant to how many back years that we can assess, can be relevant to whether someone is liable to a penalty and, if so, what penalty they will be liable to for an error in their tax affairs.
“There are no penalties for innocent errors in your tax affairs.
“So if you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it’s paid late, you would not be liable for a penalty.
“But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances.”
The row surrounding Mr Zahawi centres on a tax bill over the sale of shares in YouGov – the polling firm Mr Zahawi founded – worth an estimated £27 million which were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.
Mr Zahawi has said that HMRC concluded there had been a “careless and not deliberate” error in the way the founders’ shares, which he had allocated to his father, had been treated. He also insisted he is “confident” he has “acted properly throughout”.
Pressed on the case, Mr Harra also suggested there could be certain specific circumstances in which he could appear before the committee to discuss some details of a minister’s tax affairs, as he said he would aid the ethics inquiry into Mr Zahawi in any way he could.
“It would not be normal for me to account to this committee for a person’s tax affairs, but if there are general issues about how we manage tax and I’ve got the ability to be disclosive that’s obviously something I would take advantage of.
“If we are asked by the independent adviser on ministerial interests to help with the inquiry, we will do so in any way we possibly can,” he said. But he also indicated that Mr Zahawi would need to grant his consent as part of such a process due to the confidential nature of an individual’s tax affairs.
Downing Street declined to comment on the remarks, but said Mr Sunak “expects participation” with the inquiry.