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HMRC internal manual

Compliance Handbook

Offshore matters: failure to file on time penalties: disclosures and the penalty percentage ranges for offshore matters

Where the disclosure involves an offshore matter or offshore transfer, see CH100000, then the maximum and minimum penalties that apply to 12 month further penalties, see CH63200, may be higher than the maximum and minimum penalties for onshore matters. However, when determining the 12 month further penalty percentage, the matters to consider are the same for both onshore and offshore. 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 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 disclosure. This new element only applies to offshore matters and offshore transfers. See CH117000 for further guidance.

For offshore matters, when calculating the amount of the penalty, you will also need to establish whether the error falls within category 1, 2 or 3, see CH112400.

The penalty ranges below for offshore matters, only apply to income tax, capital gains tax, bank payroll tax and registered pension schemes. The standard rates, see CH63200, apply to all other taxes.

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 full 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 the maximum reduction for quality of a disclosure when calculating the penalty on the category 3 information.

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

  • the behaviour - deliberate, or deliberate and concealed
  • the category of information, see CH112300
  • the type of disclosure
  • the minimum and maximum penalty percentage.

Please note that for 2015-16 and earlier periods a category 1 offshore matter has the same penalty ranges as onshore matters. For 2016-17 and later periods there are different penalty percentage ranges for all three offshore categories.

Penalty Percentage Rates for periods up to and including 2015-16

Category Behaviour Type of Disclosure Minimum Penalty Maximum Penalty
Category 1 Deliberate Unprompted 20% 70%
Category 1 Deliberate Prompted 35% 70%
Category 1 Deliberate and concealed Unprompted 30% 100%
Category 1 Deliberate and concealed Prompted 50% 100%
Category 2 Deliberate Unprompted 30% 105%
Category 2 Deliberate Prompted 52.5% 105%
Category 2 Deliberate and concealed Unprompted 45% 150%
Category 2 Deliberate and concealed Prompted 75% 150%
Category 3 Deliberate Unprompted 40% 140%
Category 3 Deliberate Prompted 70% 140%
Category 3 Deliberate and concealed Unprompted 60% 200%
Category 3 Deliberate and concealed Prompted 100% 200%

Penalty Percentage Rates for periods from 2016-17 and later years

Category Behaviour Type of Disclosure Minimum Penalty Maximum Penalty
Category 1 Deliberate Unprompted 30% 70%
Category 1 Deliberate Prompted 45% 70%
Category 1 Deliberate and concealed Unprompted 40% 100%
Category 1 Deliberate and concealed Prompted 60% 100%
Category 2 Deliberate Unprompted 40% 105%
Category 2 Deliberate Prompted 62.5% 105%
Category 2 Deliberate and concealed Unprompted 55% 150%
Category 2 Deliberate and concealed Prompted 85% 150%
Category 3 Deliberate Unprompted 50% 140%
Category 3 Deliberate Prompted 80% 140%
Category 3 Deliberate and concealed Unprompted 70% 200%
Category 3 Deliberate and concealed Prompted 110% 200%

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

FA09/SCH55/PARA6A

FA09/SCH55/PARA15A