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HMRC internal manual

Claimant Compliance Manual

Penalties and interest: incorrect claims - establishing which behaviour category applies - enquiries or examinations

In cases where there has been an incorrect claim, an opening letter will have been sent to the customer along with the leaflet Tax Credits - Penalty Decisions. The Tax Credits - Penalty Decisions leaflet explains the customer’s rights and the reasons why a penalty may be charged.

If you become aware of the possibility of penalties during a telephone conversation with the customer(s) and the Tax Credits Penalty Decisions leaflet has not been sent you will need to warn the customer of their position and remind them of the Human Rights Act, or stop the conversation and say you will be putting your thoughts in writing.

Where a behaviour category leads to a penalty, you must apply the guidance in the CCM in a consistent, fair but firm manner. Although you might understand why the customer made a wrong claim this should not affect the consequences of them doing so. Your role is to explain what they have done wrong, correct this for the future and deal with the past.

You should always record the reason for your decision to charge a penalty on form 94NTC. You should also always record the reason for your decision not to charge a penalty with a note on file as the repetition of a particular behaviour can influence the amount of a later penalty. If the behaviour continues and we decide to seek a penalty on the second occasion, then it may be the second occasion we have considered a penalty but it is still the first penalty to be charged. The percentage amount will not be affected