Thats because they are Civil as has been proved recently. Its only the EU that believes that there is an element of Criminal and this is why we have to give the Article 6 warning.
I can understand Ronalds concerns and so many have expressed these views and this is why the review of the powers and penalties has resulted in a wholly different view.
So for returns made after 6th April 2008, there will be a new view taken which will result in less interventions including a penalty in the settlement. However, when we do include a penalty, watch out because it wont be a nominal 10% or 15%, as this is likely to be a far larger an punative figure that recognises the behaviour of the taxpayer.
Alan has referred to the correct caselaw but there are a couple of things here. The officer has to ask why the underpayment arose. The fact that the return is understated is at best because someone made an error. There is no such thing as an innocent error as someone erred and duties were understated. They signed a declaration on the return to say that it was correct so only the taxpayer is responsible.
Asking why is one of the most important questions the enquiring officer must ask, and they must accurately and completely record the answer.
Fraudulaent is easy, it is something that is recorded as something other than it is.
Willful neglect is someone paying something and knowing that it is not being recorded correctly. An oficer of the company paying himself by cheque and putting that through the payroll, but taking £50 from the till in cash and not putting this through the payroll is this, as long as they dont record the payment as something else, else this is the last example again.
Neglect is basically everything else but if someone says, I didnt know this was taxable, the why question comes into play. If they didnt know, who did they ask, an accountant, HMRC, a guy down the pub, someone on UK finance.
The only one that may include a get out clause is if he asked HMRC. If he spoke to the right person, disclosed all the facts and circumstances, received advice and followed it, then not only is there no penalty, there should not be an underpayment either.
Lasly, the onus is always on the taxpayer. the duty is on the appelant to prove that HMRC is wrong.