Technical consultation responses on HMRC’s Modernising the correction of errors draft close tomorrow, 7 September 2026. That is not a soft policy note. It is the last clean window before the package is expected into Finance Bill 2026-27.
Primary sources: the policy paper and draft legislation pack, the accessible draft Schedule 24A text, Macfarlanes’ Can We Fix It? Yes, We Must note, TLT’s September board-governance analysis, Schedule 24 FA 2007 as it stands today, TMA 1970 s36 on extended time limits, HMRC’s Guidelines for Compliance GfC13 on legal uncertainty, the Business Risk Review+ framework, Senior Accounting Officer rules, and the professional conduct baseline in PCRT.
If your tax control stack still treats “we found an issue in the working papers” as an internal debate rather than a clocked correction obligation, rewrite the process before the draft hardens.
What the draft actually does
Two mechanisms. Both matter.
1. Statutory duty to correct (new Schedule 24A, Part 1).
If you gave HMRC a document of a kind listed in the Schedule 24 table (self assessment, corporation tax returns, VAT returns and the rest of the usual set), that document contains an inaccuracy that meets Condition 1 (broadly, one that leads or would lead to an understatement of tax or similar), you later become aware of it, and correction is still possible within existing time limits, you must take reasonable steps to secure the correction. Reasonable steps means: amend if you can; otherwise inform HMRC.
Fail that duty and the draft re-characterises the inaccuracy as deliberate for Schedule 24 penalty purposes. Not careless. Deliberate. That is the whole point of the measure.
2. Customer Correction Notices (new Schedule 24A, Part 2).
HMRC may issue a correction notice where it has reason to suspect an inaccuracy in a relevant document and the position is still correctable. The notice specifies the inaccuracy or kind of inaccuracy and sets a deadline. You either take reasonable steps to correct, or explain why the document does not contain that error.
Non-compliance creates a presumption of carelessness, unless the behaviour is already deliberate (including via the Part 1 re-characterisation) or you can show reasonable care to avoid the inaccuracy.
There is a narrow safe harbour. Proposed new paragraph 3D of Schedule 24 says you are not liable to a careless inaccuracy penalty if (a) you have not received a correction notice in the preceding six years, and (b) you take reasonable steps to correct in line with the notice before the deadline. First CCN in a rolling six-year window can clear a careless penalty. A second one does not.
Read the accessible draft on the TMA s118(6) tweak as well — not the press gloss.
Why this is not “just tidy your filings”
Three practical shifts for a CFO.
Awareness becomes a legal event.
Under current law, failing to fix a known error is bad governance and often poor professional conduct. It is not automatically deliberate for Schedule 24. The draft changes that. Once awareness exists and correction is still open, inaction is engineered into the deliberate ladder — higher maximum penalties and the path toward the twenty-year assessment window under TMA s36 rather than the standard four- or six-year windows.
Suspicion is enough for a CCN.
HMRC does not need a concluded enquiry finding to issue a notice. Reason to suspect is the threshold. That is deliberately lighter-touch than a full enquiry, and it will be used that way. Treat a CCN as a mini-enquiry with a hard response clock, not as “another letter from Customer Compliance.”
Uncertainty is still your problem.
Tax is full of judgement calls. GfC13 exists precisely because HMRC accepts that legal interpretation can be contested. The draft does not abolish uncertainty. It does force you to document when you decided something was not an inaccuracy, why, who signed that view, and what you did when new facts arrived. “We disagreed with HMRC’s preferred reading” is only a defence if the file shows the disagreement was live, reasoned and escalated — not a silent hope that nobody would ask.
How this sits with the rest of the stack
Do not read the duty to correct in isolation. Business Risk Review+ already scores large businesses on tax governance. Senior Accounting Officer already demands adequate tax accounting arrangements. GfC13 already expects a documented approach to legal uncertainty. Uncertain tax treatment rules already push disclosure of positions that diverge from HMRC’s known view. PCRT already requires advisers who spot client errors to recommend correction.
The draft does not invent governance culture. It attaches statutory penalty re-characterisation to a failure to act once you know. That is the difference between a soft expectation and a board risk. Reckless direct-tax statement proposals sit next door, not on top — criminal track versus civil duty-to-correct. Address both without mixing the labels.
Where CFOs get burned
1. Email trails that create “awareness” with no owner.
A junior finds a basis mismatch in a CT working paper. The thread dies in a shared mailbox. Six months later HMRC issues a CCN on the same point. Under the draft, the awareness clock may already have started. Name an owner for every potential inaccuracy above a de minimis, with a decision deadline.
2. “We will fix it in the next return” without a notification route.
If amendment is closed but assessment or notification routes remain open, “next return” is not automatically reasonable steps. The draft’s definition is amend if you can, otherwise inform HMRC. Map the actual statutory route for each tax head before you bank the delay.
3. M&A and earn-out files.
Due diligence often surfaces historic return issues. Discovery in a data room is awareness for the party who owns the filing obligation. SPA tax covenants and post-completion protocols need an explicit duty-to-correct clause, not a vague “buyer will cooperate with tax affairs.”
4. Agent and in-house split brains.
PCRT binds the adviser; the statutory duty binds the taxpayer. If the adviser recommends correction and the client refuses, both sides need a contemporaneous record. Verbally parking a correction memo without a written decision builds the fact pattern for deliberate treatment.
5. Second CCN in six years.
The careless-penalty safe harbour is one-shot in a rolling window. Log every CCN at group level. Leave root-cause controls untouched after the first notice and you pay on the second.
What to lock this week
Consultation responses still go to tarcompliance@hmrc.gov.uk until 7 September 2026. If you have a live point on “awareness,” “reasonable steps,” or CCN drafting, send it. After that, assume the architecture sticks and fight only on guidance detail.
Internal lock-list for the CFO pack:
1. Error register. Every identified potential inaccuracy with tax head, period, quantum estimate, awareness date, owner, decision, and correction route. Review monthly at tax committee; material items to audit committee.
2. Awareness definition. Written standard for when the company is treated as aware — including knowledge of named individuals in tax, finance, legal and the SAO population. Silence in a team inbox is not a control.
3. CCN playbook. 48-hour triage, evidence pack, correct-or-explain decision tree, and board escalation thresholds. Practise it once before the first real notice.
4. Penalty behaviour matrix. Map current open issues against careless / deliberate / concealed labels as if the draft were already law. Anything that would flip to deliberate on known-but-unfixed facts gets a correction plan or a documented non-inaccuracy analysis tied to GfC13.
5. Contract and PE/M&A overlays. Update tax warranty, indemnity and completion-accounts mechanics so discovered return errors have a funded, timed correction path.
6. Advisor engagement letters. Require written correction recommendations and client decision records as standard deliverables, aligned to PCRT.
7. BRR+ / SAO narrative. Refresh the governance section so the next risk review can see the duty-to-correct process, not a slide that says “we take tax seriously.”
Bottom line
The consultation closes tomorrow. The draft is short. The consequence is not. Once you know, you must act — or the law treats the inaccuracy as deliberate. CCNs let HMRC force the issue without a full enquiry. Boards that still park known tax noise for “year-end” are writing next year’s penalty narrative now.
Lock the error register, awareness definition and CCN playbook. Respond if you have a real drafting point. Then run the business as if Finance Bill 2026-27 enacts the architecture largely as published — the base case a competent CFO plans for.