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HMRC internal manual

Compliance Handbook

Special reduction: Before you consider special reduction

You only consider special reduction after you have fully considered all matters within the penalty law that can affect

  • whether there is liability to a penalty at all, and
  • the amount of the penalty.

The questions below provide examples of matters that you should already have taken into account. You may wish to look at these again before considering special reduction.

The legislation covers all the matters below in relation to whether a penalty is due and, if so, how much that penalty will be. A special reduction is a separate matter and can only be made where there are special circumstances. We discuss special circumstances in CH170600.

Is there a reasonable excuse for a failure?

If the person has a reasonable excuse for a failure and remedies that failure without unreasonable delay after the excuse ceases to exist, there can be no liability to a penalty. Therefore there is no special reduction to consider.

Reasonable excuse is discussed at

Has an inaccuracy been made despite taking reasonable care?

If the person has provided a return or document that contains an inaccuracy but that inaccuracy was made despite the person taking reasonable care, there can be no liability to a penalty under FA07/SCH24. Therefore there is no special reduction to consider.

Inaccuracies made despite taking reasonable care are discussed at CH81130.

Is the disclosure unprompted or prompted?

If you had decided that the disclosure was prompted but the person then produces evidence that they had made an unprompted disclosure at some stage before you raised the matter with them, this will affect the amount of the minimum penalty.

Has appropriate reduction for disclosure already been given?

Where there has been a failure or inaccuracy and you have established liability to a penalty, where applicable, you will have calculated the reduction for disclosure in order to arrive at the appropriate penalty level. You should only consider whether any special reduction is appropriate if you are content the appropriate reduction for quality of disclosure has been given. If you are not content that the appropriate reduction for quality of disclosure has been given, you should look at this again before you consider special reduction

Reduction for disclosure is discussed at

Is there delayed tax?

Where there is liability to an inaccuracy penalty under FA07/SCH24, check whether a lesser penalty is due if the careless inaccuracy resulted in delayed tax, see CH82390