HMRC’s Proposed New Inaccuracies Regime: What Businesses Need to Know

August 6, 2026

By Oliver Mountford, Compliance Manager

HMRC has published draft legislation that would significantly strengthen the obligations placed on taxpayers when errors are discovered in previously submitted tax returns and supporting documents.

The proposals, published on 13 July 2026 under Modernising the correction of errors, would introduce an explicit statutory duty to correct known inaccuracies alongside a new HMRC power to issue Customer Correction Notices. Although the legislation is not yet in force and no commencement date has been announced, it could materially change the consequences of failing to address an identified error.

 

A new statutory duty to correct

Under the proposed rules, a taxpayer who becomes aware that a document submitted to HMRC contains an inaccuracy would be required to take reasonable steps to correct it.

Where the taxpayer can still amend the relevant return, they must do so. If the normal amendment window has closed, they must instead notify HMRC so that the position can be corrected through an assessment or another appropriate mechanism.

The duty would apply where the inaccuracy results in:

  • an understatement of tax;
  • a false or inflated tax loss; or
  • a false or inflated repayment or tax credit.

It would only apply while the taxpayer or HMRC remains within the relevant statutory amendment or assessment time limit.

 

Failure to correct could be treated as deliberate

The most significant aspect of the proposals is the penalty treatment.

Under the existing Schedule 24 regime, an error that was neither careless nor deliberate when originally submitted can be treated as careless if the taxpayer later discovers it but does not take reasonable steps to inform HMRC.

Under the proposed regime, failing to correct a known error would instead cause the inaccuracy to be treated as deliberate.

For a domestic tax error, a careless inaccuracy currently attracts a penalty of between 0% and 30% of the potential lost revenue for an unprompted disclosure, or between 15% and 30% for a prompted disclosure. A deliberate inaccuracy can attract penalties of between 20% and 70%, increasing further where concealment is involved.

Deliberate treatment may also allow HMRC to assess tax going back up to 20 years. Consequently, an error that was originally innocent or careless could become considerably more serious because of the taxpayer’s subsequent failure to correct it.

 

Customer Correction Notices

HMRC would also receive a new power to issue a Customer Correction Notice where it has reason to suspect that a return or other document contains an inaccuracy.

The notice would require the taxpayer, by a deadline specified by HMRC, to:

  • correct or disclose the suspected error; or
  • explain why no correction is required.

Where a taxpayer receives their first Customer Correction Notice within a six-year period and corrects a careless inaccuracy by the deadline, the draft legislation provides protection from an inaccuracy penalty. However, that protection would not apply to genuinely deliberate errors and may not be available where another notice is issued within the following six years.

If the taxpayer fails to respond adequately and HMRC subsequently identifies an error, the inaccuracy may be presumed careless unless the taxpayer can demonstrate that reasonable care was taken.

 

Particular relevance to R&D claims

R&D tax relief claims are likely to be an important area of application. Company tax returns, supporting computations and documents relating to claims for relief fall within the existing Schedule 24 framework.

The proposed duty could therefore arise where a company subsequently discovers that it:

  • applied the wrong R&D scheme or company-size test;
  • included ineligible subcontractor or externally provided worker costs;
  • overlooked overseas expenditure restrictions;
  • included capital expenditure or intangible fixed asset additions;
  • used unsupported staff or cost apportionments;
  • incorrectly applied the contracted-out R&D rules; or
  • duplicated or otherwise overstated qualifying expenditure.

A company identifying such an issue would need to act promptly, even where the ordinary CT600 amendment window had closed.

Preparing for the change

Businesses should consider introducing a documented process for identifying, investigating and escalating potential tax errors. Records should show when an issue was first identified, when it became a confirmed inaccuracy, what advice was obtained and what corrective action was taken.

The legislation is still subject to consultation, with responses due by 7 September 2026. Important areas requiring clarification include the meaning of “becomes aware”, whose knowledge counts within a company, how adviser knowledge will be treated, what constitutes reasonable steps and whether taxpayers should have a direct right of appeal against a Customer Correction Notice.

The central message is clear: under HMRC’s proposed regime, discovering a genuine mistake would not necessarily create the greatest risk. The more serious consequences could arise where the taxpayer becomes aware of that mistake and fails to put it right.

 

Next Steps

Get in touch with Bonham & Brook’s Compliance Team to begin your assessment today. For expert support in navigating these complexities, contact us here.

 

 

Oliver Mountford

Compliance Manager

 

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