Watch what you say to the taxman even more than in the past – as he is eavesdropping on every conversation you have about your tax affairs.

New guidance lays out standards and penalties for giving ‘misleading’ information to the tax man – and information can be anything you say in an e-mail, letter, fax or telephone call.

Penalties for inaccuracies are a percentage of the tax lost as a result of the error.

The percentage is based on a number of things including how the inaccuracy occurred – for instance on purpose or by mistake.

A new concept of suspended penalties is also being introduced.

The new rules say an inaccuracy made by a person in a document or return may be

• An inaccuracy made despite the person taking reasonable care in which case no penalty is due

• Careless

• Deliberate but not concealed

• Deliberate and concealed.

Penalties for deliberate inaccuracies are higher than for careless inaccuracies and apply where HMRC has issued an understated assessment based on information provided by a taxpayer.

If you think your tax assessment is not correct, you must tell the HMRC within 30 days.

The new penalty rules apply to returns or documents • For return periods starting on or after 1 April 2008 • Where the due date for filing is on or after 1 April 2009.

The inaccurate document will need to satisfy two conditions before a penalty can be charged.

1. The document either amounts or leads to

- An understatement of the person's liability to tax

- A false or inflated statement of a loss by the person

- A false or inflated claim to repayment of tax.

2. The inaccuracy was careless, deliberate or deliberate and concealed.

There is no penalty where the taxpayer makes a mistake despite taking reasonable care. If a document contains more than one inaccuracy, a penalty can be charged for each inaccuracy.

Penalties can be up to 100% of the potential lost tax as a result of the inaccuracy