HMRC has produced toolkits to provide guidance on areas of error frequently seen in tax returns. These toolkits set out the steps that you can take to reduce those errors. Here the ICAEW Tax Faculty lists the available toolkits and provide further information and guidance about how they may be used.
All toolkits can be found through links on the HMRC web page. HMRC updates the toolkits regularly (annually in most cases).
|Capital Allowances for Plant and Machinery|
|Capital Gains Tax for Land and Buildings|
|Capital Gains Tax for Shares|
|Capital Gains Tax for Trusts and Estates|
|Capital v Revenue Expenditure|
|Chargeable Gains for Companies|
|Directors’ Loan Accounts|
|Expenses and Benefits from Employment|
|Income Tax Losses|
|NIC and Statutory Payments|
|Private and Personal Expenditure|
|Small Profits Rate and Marginal Relief|
|Trusts and Estates|
|VAT Input Tax|
|VAT Output Tax|
|VAT Partial Exemption|
This information has been compiled and updated by ICAEW's Tax Faculty and is provided free of charge. The faculty provides a broad range of detailed technical and practical guidance on tax matters. Find out more about the benefits of joining the Tax Faculty.
Each toolkit has three elements:
HMRC states that the toolkits should help people preparing returns to:
HMRC provides information about the toolkits and how to use them.
The toolkits are primarily aimed at agents and advisers, though they are available to anyone. Toolkits will be useful if you are preparing a particular return, and also if you are dealing with an area which you are not involved with on a regular basis.
You do not have to use the toolkits – their use is optional not mandatory.
There are a variety of ways in which an agent may use a toolkit. One option is to print off the checklist and work through it. Another option is to use the toolkit to check that the perceived risks are covered by your own tax return review procedures.
You are not required to tell HMRC whether a toolkit has been used. HMRC has no plans to introduce ‘tick boxes’ on tax returns for toolkit use.
The checklists in the toolkits are based on errors which HMRC commonly finds. They are not comprehensive statements of all the errors that might arise in any particular return, nor do they identify problems with new legislation (as HMRC will not yet have seen errors from this).
As with all HMRC guidance material, HMRC’s views do not have statutory force and there may be other valid views of how tax law should be applied to a particular item.
HMRC states at the top of its home page on toolkits that the use of a toolkit may help to demonstrate that reasonable care has been taken (in the context of the penalties regime for errors in returns). This requires clarification.
First, the obligation to take reasonable care in preparing a return or document is that of the taxpayer, not their agent. As part of their efforts to take reasonable care, a person may seek professional advice and appoint an agent to help, but this does not relieve them of responsibility for their tax affairs.
HMRC expects the taxpayer to ensure, within their ability and competence, that the agent they have appointed is competent to do the job and is doing it (see HMRC’s Compliance Handbook section CH 84540).
Second, whether an agent has used a toolkit is not of itself evidence of whether or not reasonable care has been taken in preparing a return.
HMRC says in its more detailed guidance about toolkits:
‘The aim of these toolkits is to highlight errors which HMRC finds commonly occur and to help you avoid inaccuracies in your clients’ returns that may otherwise lead to penalties. Their use remains entirely voluntary. Whether reasonable care has been taken in any particular case will be a question of fact and will not depend on whether a toolkit has or has not been used.'