As part of L‑Day 2026, the Government has published draft legislation to ‘modernise the correction of errors’ in tax documents sent to HMRC. Once enacted, the measures will introduce a statutory ‘Duty to Correct’, i.e. a duty on taxpayers to correct known inaccuracies. In addition, where HMRC have reason to suspect a document contains an inaccuracy, they can issue ‘Customer Correction Notices’ (CCN). These will require taxpayers to respond by correcting an inaccuracy, making a disclosure or confirming no correction is required.
Failure to comply with the Duty to Correct or to respond to a CCN will carry significant penalty consequences. It may also allow HMRC up to 20 years to assess any tax that is found to be due.
Background and scope
The new Duty to Correct builds on Schedule 24 FA 2007, the existing framework for penalising inaccuracies in returns and other tax documents. The proposed legislation imposes an explicit duty to correct that was previously inferred from criminal law principles and penalty provisions. These new provisions are not limited to income tax and corporation tax: subject to exceptions, they can also cover multinational top-up tax, inheritance tax, VAT, insurance premium tax, stamp duties, excise duties and a range of other taxes. The duty applies only while the inaccuracy can still be corrected within statutory time-limits afforded to HMRC to raise assessments.
Key technical changes
The draft legislation introduces a new Schedule 24A to FA 2007, containing both the Duty to Correct and HMRC’s power to issue a CCN.
Under the new duty, a person who becomes aware of an inaccuracy resulting in a loss of tax in a relevant tax document must take reasonable steps to correct it, either directly or by informing HMRC. Failure to do so after becoming aware of the inaccuracy is treated as deliberate behaviour for penalty purposes and discovery assessment time limits, so that HMRC could raise assessments going back up to 20 years. So even where the initial error could be classed as having arisen due to carelessness, failure to correct the position will reclassify it as deliberate, carrying harsher penalties and longer time limits to raise assessments.
HMRC may also issue a CCN where they have reason to suspect that a document contains an inaccuracy. The CCN must identify the inaccuracy, or type of inaccuracy, and require the recipient either to correct it by a specified deadline or to explain why no such error exists. If the CCN is not complied with, any inaccuracy is presumed careless unless it was deliberate (including as a result of the new Duty to Correct) or the taxpayer can show they took reasonable care to avoid the inaccuracy.
CCNs appear closer to nudge letters but with a statutory underpinning (unlike previously), rather than assessments. If necessary, HMRC would still need to assess any tax due, subject to the usual safeguards. However, taxpayers should treat a CCN response seriously in the same way as any other compliance check by HMRC, ensuring that any decision not to amend is supported by a documented and detailed check of the position.
Schedule 24 is also amended to introduce a limited 'safe harbour' for careless errors. Where a person receives their first CCN in six years and corrects the inaccuracy by the deadline, no penalty arises for that careless inaccuracy. By contrast, failing to comply with the Duty to Correct upgrades the error to deliberate (as mentioned above).
Why does this matter for taxpayers?
The practical effect is to impose a Duty to Correct once a taxpayer becomes aware of an inaccuracy in a document submitted to HMRC. Ignoring a known error may lead to higher penalties and potentially longer assessment time limits. It may also risk criminal sanction. Businesses may need clearer processes for identifying, escalating, and correcting tax errors, and for evidencing the steps taken in response to a CCN, particularly where no correction is made. In addition, CCNs should be treated seriously and HMRC’s identification of an alleged error should be rigorously investigated.
What should readers consider?
Taxpayers should monitor the progress of the legislation, HMRC guidance, and commencement regulations, as well as developments in the broader proposed reform of behavioural penalties and the consultation on reckless untrue statements.
In addition, taxpayers will want to consider practical steps to prepare, for example:
- Reviewing governance and controls for identifying and correcting tax errors; and
- Agreeing how CCNs will be handled, including who leads the response and evidencing how the taxpayer sought to check the position at the time.