SIOG9250 - Settlement by agreement: consideration of penalties: fraudulent or negligent conduct
This instruction applies to penalties charged for periods earlier than those to which Sch 24 FA 2007 and Sch 41 FA 2008 apply.
Prior to the FA 1989 changes it was often particularly material whether a taxation offence was one of fraud. Following the implementation of Sch 24 FA 2007 and Sch 41 FA 2008, a similar distinction between deliberate and careless behaviour has again become important.
For periods since 1989 and up to the introduction of New Penalties this distinction has less significance for direct tax although it will affect the abatement for size and gravity. Furthermore, VAT penalties for dishonest conduct could be prejudiced if negligence only were alleged in relation to direct tax offences. See EM5102.
In settlement negotiations Investigators should still make it clear what offence (that is fraud or negligence) is regarded as occurring. The taxpayer is entitled to know this so that the proper arguments for abatement can be put forward.
Investigators should therefore indicate in the penalty submission (SIOG9215) the nature of the offence and it is this which should be contended at the settlement meeting.
There is extensive advice at EM5100 and onwards about culpability. This should be studied and advice sought where necessary.