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HMRC internal manual

Compliance Handbook

Offshore matters: failure to file on time penalties: disclosure involving offshore matters

The maximum and minimum penalties that apply to 12 month further penalties, see CH63200, where the disclosure involves an offshore matter may be higher than the maximum and minimum penalties that apply if an offshore matter is not involved. However, the matters to consider when determining the 12 month further penalty percentage are the same as for when an offshore matter is not involved. The only additional step in the process is to identify the category of information that was withheld, see CH112300.

The matters to consider when determining the penalty percentages depend on

  • the behaviour in relation to the type of failure, see CH62200 for income tax, capital gains tax, bank payroll tax and registered pension scheme,
  • whether the disclosure is unprompted or prompted, see CH63140, and
  • the quality of disclosure, see CH63220.

The quality of the disclosure uses the same elements of telling, helping and giving access that are considered for disclosures that do not involve an offshore matter, see CH63240.

Where an offshore matter or offshore transfer, see CH100000, is a factor in the disclosure, Schedule 21 FA 2016 introduced a new element to the quality of disclosure for years 2016-17 and later. ‘Additional information’ is now to be taken into account alongside telling, helping and giving when considering the quality of any disclosure to HMRC. This new element only applies to offshore matters and offshore transfers. See CH117000 for further guidance.

When calculating the amount of the penalty for any year, you will also need to establish whether the error falls within category 1, 2 or 3, see CH112400.

Where a person has taken a significant period to correct their non-compliance, or they would previously have been able to make their disclosure through one of HMRC’s offshore facilities they can no longer expect HMRC to agree full reduction for disclosure. In such cases it is unlikely that HMRC would reduce the penalty more than 10 percentage points above the minimum of the statutory range.  For this purpose we would normally consider a ‘significant period’ to be over three years or less where the overall disclosure covers a longer period.

If the information that the person withholds falls into more than one category of information then each category of information is treated as a separate failure, see CH112500. Therefore, if a disclosure is made about only one category of information it means that the reduction for disclosure does not have to be applied to all of the categories of information.

Example

Daisy makes a disclosure about offshore income that falls within category 3 information. We make further enquiries and identify category 1 information that was also deliberately withheld. Although Daisy could have made a prompted disclosure about the deliberately withheld category 1 information, she did not. Therefore, we only allow a reduction for a disclosure when calculating the penalty on the category 3 information.

The table below shows the maximum and minimum penalty percentages where a return has been outstanding for 12 months and involves an offshore matter. The table includes

  • the type of failure - deliberate, or deliberate and concealed, and
  • the category of information, see CH112300.

Type of failure

Type of failure Category of information Maximum penalty percentage Minimum percentage for prompted disclosure Minimum percentage for unprompted disclosure
Deliberate Category 1 information 70% 45% 30%
Deliberate Category 2 information 105% 62.5% 40%
Deliberate Category 3 information 140% 80% 50%
Deliberate and concealed Category 1 information 100% 60% 40%
Deliberate and concealed Category 2 information 150% 85% 55%
Deliberate and concealed Category 3 information 200% 110% 70%

There is a minimum penalty of £300, regardless of behaviour.

FA09/SCH55/PARA6A

FA09/SCH55/PARA15A