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HMRC internal manual

Alcohol Wholesaler Registration Scheme

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HM Revenue & Customs
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Special reduction: when special circumstances do not exist

We can only make a special reduction where there are special circumstances. You must not give a special reduction without authority from TAA to do so.

Special circumstances do not include the ability to pay.

The law for each penalty provides:

  • the penalty ranges for a given behaviour, and
  • the maximum reduction that can be allowed for the quality (timing, nature and extent) of any disclosure.

Only special circumstances allow us to use special reduction to reduce a penalty below a statutory minimum.

The headings below set out some matters that are not special circumstances.

Point covered by some other point of law

Special circumstances do not exist for the purpose of special reduction if the circumstances are covered by some other provision of the penalty law, resulting in either no liability to a penalty or a reduction in the penalty permitted under the statutory scheme. So, for example:

  • where a set of circumstances constitutes a reasonable excuse there is no liability to a penalty and therefore there is no special reduction to consider
  • where factors have already been taken into account in deciding the reduction allowed for the person’s quality of disclosure, those factors will not normally be reconsidered as special circumstances for the purposes of a special reduction
  • where re-examination of the facts, or new facts provided to us, result in us changing our view and regarding a prompted disclosure as unprompted, the same facts will not normally also be special circumstances for the purposes of special reduction.

Even where the circumstances do not appear to be covered by another provision of the penalty law, for example if we have not taken them into account when considering the behaviour or quality of disclosure, this does not automatically mean we can give a special reduction. We will only consider special reduction where one of the two types of special circumstances apply.

Behaviour is deliberate

It is unlikely that a special reduction will apply to a penalty where we consider behaviour is deliberate, whether or not concealed. In that situation it would not normally be enough for the person to say their error or failure was only caused by uncommon or exceptional circumstances.

Size of penalty

On its own, the size of the penalty is not a special circumstance and therefore does not allow us to consider special reduction. This is because the structure and level of penalties were fully considered when legislated by Parliament, giving due consideration to all the likely practical effects across all regimes and types of taxpayer.

Proportionality

A person may request a special reduction on the basis that a penalty is disproportionate, but the penalty regime is fully compliant with their rights under the European Convention on Human Rights (ECHR) to the peaceful enjoyment of their possessions.

All our legislation is required to comply with the Human Rights Act and to be proportionate. The TWA penalty is intended to be punitive and deterrent in nature as a business must pass a fit and proper test before they start trading. This may sometimes result in a penalty that could in certain circumstances be considered harsh. These penalty regimes are, however, fully compliant with Protocol 1 of Article 1 of the ECHR which:

  • protects a person’s right to the peaceful enjoyment of their possessions but
  • ensures the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

The law ensures that the amount of an AWRS penalty is proportionate by:

  • taking into account the behaviour of the person
  • gearing it to a capped maximum, and
  • making it subject to statutory maximum and minimum levels that take account of the seriousness of the offence.

The size of the resulting penalty is therefore not, on its own, a special circumstance.

However, the specific circumstances that resulted in a person being charged a penalty of a specific size may constitute special circumstances that may qualify for a special reduction.

Example 1 - Judith

Size of the penalty set by law is not, by itself, unusual or uncommon and is not a special circumstance

Judith is found to be trading without approval but her failure is non-deliberate. She tells us all about her wholesale activities once prompted and she is given a 100% reduction for quality of disclosure. She is liable to a penalty of £2000.

Judith asks for a special reduction of the penalty as she has only made a couple of actual sales amounting to £300 and she argues the size of the penalty is disproportionate. The obligation to apply for approval is key to realising the benefits of the AWRS. So we do not consider the size of the penalty to be a special circumstance.

Example 2 - Maureen

Maureen submits her application indicating she has been trading for a month. We agree a full reduction for quality of disclosure and she is liable to a £1000 penalty for a non-deliberate unprompted disclosure.

Maureen agreed with our view of the behaviour but argued that the failure was not so bad as to justify the size of the penalty. She argued it was a simple oversight.  There were no other relevant facts in the case.

There were no special circumstances. The penalty is the statutory minimum for the penalty behaviour and special reduction is not appropriate.

Case law on the meaning of ‘special circumstances’ in the context of non-penalty laws.

It is recommended that you read the guidance in the Compliance Handbook regarding case law. This can be found at CH171000.

When to consider special reduction

For TWA penalties you must consider special reduction in all cases before issuing the penalty assessment, whether or not the person requests special reduction. You should make a note of your decision in all cases even if you consider special reduction is not appropriate. This is so you can demonstrate to a tribunal, if required, that you considered special reduction.

You must contact TAA, if:

  • your view is that special reduction may be applicable, or
  • the person disputes your refusal to make a special reduction.

Considering relevant facts

Facts should be of a special nature

When calculating and assessing penalties you will have already taken into account all facts you are aware of that are relevant to those decisions.

For instance, you have:

  • considered the relevant facts that indicate the person’s behaviour
  • established from the relevant facts whether the disclosure was unprompted or prompted, and
  • taken into account all the facts that are relevant to the telling, helping and giving access elements that qualify for reducing the penalty for quality of disclosure.

All of these facts enable you to establish whether a penalty is appropriate and to calculate the amount of that penalty.

When you consider whether there are any special circumstances in relation to the failure to apply you will not normally need to reconsider the same facts again as these have already been taken into account when you established the amount of the penalty. There may, however, be other facts in relation to the failure that were not relevant to the behaviours or the quality of disclosures, but which because of their special nature could be relevant for special reduction.

The facts may relate to how and why the penalty offence arose, and may include factors that amount to special circumstances affecting the person at the time of the penalty offence.

To be ‘special circumstances’, the circumstances in question must apply to the particular individual and not be general circumstances that apply to many wholesalers by virtue of the penalty legislation.

You could, for example, find that there are facts of a special nature relating to the following:

  • What caused the contravention in the first place?
  • What caused the person to make a disclosure that was prompted rather than unprompted?