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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Special reduction: Considering relevant facts

Facts should be of a special nature

When calculating and assessing penalties you will have already taken into account all facts you are aware of that are relevant to those decisions.

For instance, where a person has incurred a penalty under paragraph 1 of Schedule 24 Finance Act 2007 you will have

  • considered the relevant facts that indicate the person’s behaviour including whether the inaccuracy was made despite taking reasonable care or not,
  • established from the relevant facts whether the disclosure was unprompted or prompted, and
  • taken into account all the facts that are relevant to the telling, helping and giving access elements that qualify for reducing the penalty for quality of disclosure.

All of these facts enable you to establish whether a penalty is appropriate and to calculate the amount of that penalty.

When you consider whether there are any special circumstances in relation to the inaccuracy you will not normally need to reconsider the same facts again as these have already been taken into account when you established the amount of the penalty. There may, however, be other facts in relation to the inaccuracy that were not relevant to the behaviours or the quality of disclosures, but which because of their special nature could be relevant for special reduction.

The facts may relate to how and why the penalty offence arose, and may include factors that amount to special circumstances affecting the person at the time of the penalty offence.

To be special circumstances, the circumstances in question must apply to the particular individual and not be general circumstances that apply to many taxpayers by virtue of the penalty legislation.

You could, for example, find that there are facts of a special nature relating to the following:

  • What caused the inaccuracy in the first place?
  • What caused the person not to take reasonable care?
  • What caused the person to make a disclosure that was prompted rather than unprompted?

Decision should not be “flawed”

In an appeal against the amount of the penalty the tribunal will consider whether HMRC’s decision to not apply a special reduction is flawed. If the tribunal does consider HMRC’s decision to be flawed it may substitute its decision and apply a special reduction that HMRC had the power to make.

When considering whether HMRC’s decision is flawed the tribunal considers the principles applicable for judicial review. These include whether HMRC acted in a way no reasonable body of commissioners would act, whether we took something irrelevant into account or whether we disregarded something we should have taken into account.

So, when considering whether special circumstances exist that are uncommon or exceptional, and so allow you to reduce a penalty,

  • you must take into account all reported or known information that is relevant but
  • you must not take into account any information that is irrelevant.