What's Happening?
On July 13, 2026, HMRC published draft legislation for the Finance Bill 2026/27, introducing a new duty for taxpayers to correct errors in tax returns. This legislation mandates taxpayers to take reasonable steps to amend inaccuracies once they become
aware of them. Failure to comply will result in the error being treated as deliberate, leading to higher penalties under FA 2007 Sch 24. The draft also empowers HMRC to issue a Customer Correction Notice, compelling taxpayers to verify and correct their tax positions. The legislation, which is open for technical consultation until September 7, 2026, aims to modernize error correction in tax documents, including income tax, VAT, and corporation tax returns.
Why It's Important?
The introduction of this duty marks a significant shift in HMRC's approach to tax compliance, potentially affecting a wide range of businesses and individuals. By treating uncorrected errors as deliberate, the legislation increases the financial risks for taxpayers, as penalties will be calculated based on deliberate behavior rather than carelessness. This change could lead to more stringent internal compliance processes within organizations to avoid severe penalties. The legislation's impact extends across various sectors, particularly those involved in mergers and acquisitions, where disclosure processes may need to be reassessed to ensure compliance with the new duty.
What's Next?
Businesses and their advisers are advised to review and possibly enhance their internal processes for identifying and correcting tax errors. Stakeholders, including CFOs and tax committees, should be briefed on the proposed changes and the associated risks. Monitoring the progress of the Finance Bill 2026/27 will be crucial to understanding the final provisions and their implications. The consultation period until September 7, 2026, provides an opportunity for stakeholders to provide feedback and potentially influence the final legislation.
