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HMRC internal manual

Compliance Handbook

Offshore matters: asset-based penalties: special reduction

Some of the statutory penalty provisions introduced in Finance Act 2007 and subsequent Finance Acts give HMRC discretion to reduce penalties if we think it is right because of special circumstances. This is called special reduction - see CH170100.

Special reduction allows

  • the staying of a penalty
  • agreeing a compromise in relation to proceedings for a penalty.

Staying a penalty means stopping or postponing enforcement of a penalty. Agreeing a compromise allows us to forego all or part of a penalty.

Special reduction should only be considered after all other matters that can affect the penalty have already been considered - see CH170400.

To make a special reduction, there must be special circumstances. Special circumstances are either

  • uncommon or exceptional, or
  • where the strict application of the penalty legislation produces a result that is contrary to the clear compliance intention of the law.

Uncommon or exceptional circumstances should be identifiable as such and will not include factors already taken into account in establishing the penalty or the quality of disclosure.

Special circumstances does not include

  • ability to pay, or
  • a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another.

For further details and examples of special circumstances, see CH170800.

Authority from TALA required

You may refuse to make a special reduction but if you think a special reduction may be appropriate, or if you have refused to make a special reduction and the person challenges that refusal, you must refer to Central Policy TALA. You must not give a special reduction without authority from Central Policy TALA to do so.

FA 2016/Sch 22/Para 9