GOV.UK
Discrepancy Examinations: Penalty Cases: Objection to the penalty
If the claimant objects to being asked to pay a penalty you will need to carefully consider anything they say.
We can only charge a penalty where an incorrect claim or statement has been made fraudulently or negligently. If after considering what the claimant says you decide there is no penalty due you should tell the claimant that you will not be charging a penalty on this occasion and then return the papers to the AO to settle and close the case without penalty action.
If you are still of the opinion that there is fraud or neglect you will need to explain your reasons for this to the claimant. If the claimant continues to disagree with your opinion see CCM17740.
If the claimant objected to the penalty following receipt of the opening letter you will need to decide whether or not the claim or award needs to be revised before you consider the penalty position. Once the claim or award has been revised continue as shown above.