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HMRC internal manual

Compliance Handbook

Offshore matters: requirement to correct certain offshore tax non-compliance: failure to correct - circumstances when a penalty is not due - special circumstances

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH123050 for full details.

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. For comprehensive guidance on what may constitute special circumstances, see CH170100.

What does special reduction allow?

Special reduction allows

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

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.

What do special circumstances not include?

Special circumstances don’t include

  • the ability to pay, or
  • a potential loss of revenue from one person being balanced by a potential overpayment by another.

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

What authority is required for special reduction?

You may refuse a special reduction where you don’t consider there to be any special circumstances. 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 seek advice from Tax Administration Litigation & Advice (TALA), see CH175000, you cannot allow a special reduction without TALA’s authority.

FA (No 2) 2017 Schedule 18 para 17