When does a penalty arise under section 421JD of the Income Tax (Earnings and Pensions) Act 2003?

A penalty arises under section 421JD when an annual return relating to employment-related securities is not submitted in the required electronic format, or when it contains a material inaccuracy that is careless or deliberate. A penalty also applies where a material inaccuracy is not corrected within the timeframe required for amended returns.

What is the maximum penalty HMRC can impose under section 421JD?

The maximum penalty HMRC can impose under section 421JD is £5,000. HMRC has discretion in determining the exact amount and may impose a lower penalty depending on the circumstances, such as the severity of the error or the degree of cooperation from the person involved in the filing of the return.

What counts as a careless inaccuracy in an employment-related securities return under United Kingdom law?

Under section 421JD, a careless inaccuracy is one resulting from a failure to take reasonable care. For example, submitting a return without adequate checks or using information known to be unreliable could constitute carelessness. An honest mistake made despite taking proper steps to verify figures should not be treated as careless.

Can a penalty under section 421JD be avoided by correcting an inaccuracy in an employment-related securities return?

Yes, if a person identifies a material inaccuracy and submits a corrected return within the required timeframe for amended returns, no penalty applies for that inaccuracy, provided the original error was not itself careless or deliberate. Timely self-correction is therefore an important safeguard against penalties under this section.

Income Tax (Earnings and Pensions) Act 2003 section 421JD

Penalty if information not given correctly

Section 421JD sets out the penalties that apply when annual returns relating to employment-related securities are submitted incorrectly or contain material inaccuracies.

A penalty may be charged if a securities return is not submitted electronically as required, or if it contains a material inaccuracy that is careless or deliberate
A penalty also applies where a material inaccuracy is not corrected within the timeframe required for amended returns
The penalty amount is decided by HMRC but must not exceed £5,000
An inaccuracy is treated as careless if it results from a failure to take reasonable care when preparing the return

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