I've asked this question in the past, and the general opinion seems to be that if you make neat corrections then it's o.k. However, I really don't like sending crosswords in with corrections on them, so now I always photocopy the grid first, and fill the copy in (and make all my mistakes on that!), and then transfer the answers neatly to the original grid.
I tend to think that if I was picking the winner, then I wouldn't give the prize to an untidy solution, covered with Tippex.