HMRC's Duty to Correct Tax Errors - What Businesses Need in Place by April 2028

From 1 April 2028, every taxpayer will be under a general duty to correct errors in their tax returns and documents once they become aware of them. The government confirmed the start date in the Budget on 28 October 2026, following draft legislation published in July 2026.

The change matters because of what happens if you do nothing. An error you know about and leave uncorrected will be treated as deliberate, with the higher penalties and longer assessment window that come with it.

This guide explains the new duty, HMRC's new Customer Correction Notices, the related director measures, and the controls a business should have in place before 2028.

The Measures at a Glance

Measure	What it does	From
Duty to correct	Taxpayers must take reasonable steps to correct an inaccuracy once they become aware of it	1 April 2028
Customer Correction Notices	HMRC can require a taxpayer to correct a suspected error or explain why no correction is needed	1 April 2028
Online amended company tax returns	Amended Company Tax Returns must be filed online	1 April 2028
Director disqualification	Courts can consider disqualifying a director for up to five years after a conviction for a tax security offence	Offences from 1 April 2027
Wider publication of deliberate defaulters	HMRC can publish more detail, including Personal Liability Notices issued to company officers	Royal Assent to Finance Bill 2026-27

The dates come from the government's Budget 2026 overview of tax legislation and rates.

What the Duty to Correct Requires

Under the draft legislation, once a taxpayer becomes aware of an inaccuracy in a tax document that leads to a loss of tax, they must take reasonable steps to correct it. They can do that by amending the return themselves or by telling HMRC.

The duty covers income tax and corporation tax, and most other taxes including VAT, subject to exceptions. It only applies while the error can still be corrected within HMRC's normal time limits for amendments and assessments.

The duty sits with the taxpayer, not their adviser. An accountant who spots an error should tell the client, but the obligation to act, and the consequences of not acting, belong to the business.

Why Doing Nothing Becomes Deliberate

At present, a genuine mistake discovered after filing and not corrected is treated as careless, not deliberate. The new rules change that.

If a taxpayer knows about an inaccuracy and fails to take reasonable steps to correct it, the behaviour is treated as deliberate for penalty purposes. A careless error becomes a deliberate one simply by being left alone.

Deliberate behaviour carries higher penalties than careless behaviour, and HMRC can assess deliberate errors up to 20 years back, compared with four or six years for most others. For a business, the cost of an ignored error can rise sharply.

Customer Correction Notices

HMRC will be able to issue a Customer Correction Notice where it has reason to suspect a return or document contains an inaccuracy. The business must then either correct it by the deadline in the notice or explain why no correction is needed.

There is a limited safe harbour. Where a business receives its first notice in six years and corrects a careless error by the deadline, no penalty applies for that error.

A notice should be handled with the same care as a formal compliance check. The explanation you give, and the evidence behind it, may be the main record HMRC relies on later.

Director Disqualification for Tax Security Offences

HMRC can already require some businesses to pay a security deposit to protect future tax payments, typically where it sees a risk of non-payment. Failing to provide a security when required is a criminal offence.

For offences committed on or after 1 April 2027, the court sentencing that offence will be able to consider disqualifying the individual from acting as a company director for up to five years. HMRC's policy paper on director disqualification makes clear that disqualification will not be automatic.

Separately, HMRC will be able to publish more detail about deliberate defaulters once the Finance Bill becomes law, including Personal Liability Notices. These are issued when a company's penalty for deliberate non-compliance is transferred to an individual officer.

What This Means for Employers

Employers file a large volume of tax documents, and many errors start in payroll and finance processes rather than in the annual accounts. Common examples include benefits in kind reported incorrectly, expenses paid outside the approved rates and VAT treated wrongly on mixed supplies.

The duty bites at the point someone in the business becomes aware of the problem. A payroll manager who notices a recurring benefits error, or a finance assistant who spots a VAT mistake, can trigger it, so staff need to know where to report what they find.

The timing overlaps with mandatory payrolling of benefits in kind from April 2027 and the expenses changes in 2027 and 2028. Both bring new processes where errors are likely in the first year.

Controls to Put in Place Before April 2028

• Error reporting route: a clear way for staff in payroll, finance and HR to report a suspected tax error, and a named owner who receives it.
• Assessment and escalation: a procedure for deciding whether an error exists, how much tax is involved and who signs off the response.
• Correction timescales: target times for amending returns or notifying HMRC once an error is confirmed.
• Decision records: a written record of advice taken and the reasons for any decision not to correct.
• Correction notice procedure: who responds to a Customer Correction Notice, how evidence is gathered and how the deadline is tracked.
• Board reporting: regular reporting of tax risks and corrections to directors, so they can show oversight.
• Record retention: keeping returns, workings and correspondence for long enough to defend past positions.

These controls fit naturally alongside an anti-tax evasion policy and the fraud prevention procedures described in our failure to prevent fraud guide. Our round-up of Budget 2026 changes for employers covers the other measures announced on the same day.

Financial Policy and Procedure Writers

Policy Pros writes the financial policies and processes that this duty will test: tax error correction procedures, escalation and sign-off rules, board reporting templates and record retention schedules. We can build them into your existing finance manual so they are ready well before April 2028.

If your business has no written process for handling a tax error, contact us for a free quote, or call 020 3951 2875.