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HMRC internal manual

Compliance Handbook

How to do a compliance check: penalty for an inaccuracy in response to notices: amount of the penalty

The maximum penalty you can charge under Schedule 24 FA 2007 and Schedule 23 FA 2011 is £3000 for each inaccuracy. The maximum is reserved for very serious cases.

Note: For Sch 23 FA2011 - If you consider that the data-holder is able to provide the accurate data you require, then you should consider using the daily penalties, including increased daily default penalties, rather than using the inaccuracy penalty.

To discourage attempts to mislead HMRC, you should not normally charge a penalty of less than £500. This does not stop you charging a penalty of less than £500 where the circumstances warrant it or where it is part of a series of inaccuracies.

In other cases, a penalty between £500 and £3,000 in a multiple of £500 should be charged, taking into account

  • the frequency of inaccurate responses to notices
  • whether the inaccuracy was deliberate or careless
  • whether the inaccuracy was disclosed without prompting
  • other aggravating or mitigating factors, such as the quality of disclosure received during your check.

It is important to ensure that any penalty charged under para 40A is proportionate to the nature and impact of the inaccuracy (ies).

Example 1

A person creates a spreadsheet in order to comply with your information notice. The person makes a careless error in preparing the spreadsheet and the computer programme translates this one error into a series of errors.

You should treat the series of errors as only one careless inaccuracy.

Example 2

If the person in Example 1 had made a deliberate error and could be expected to have appreciated that it would lead to other inaccuracies in the spreadsheet, it might be appropriate to charge a penalty for each separate inaccuracy.