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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
Updated
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The Human Rights Act and Penalties: when to tell the person about penalties and their rights: examples

Example 1 - Direct Tax
Example 2 - Direct Tax
Example 3 - Indirect Tax
Example 4 - Indirect Tax
Example 5 - Excise 

Example 1 - Direct Tax

During a compliance check into Mr Ali’s business you request the records to address the tax risks of high repairs. The invoices indicate that some of the expenditure may not be allowable, but you cannot be certain from the descriptions on the invoices. You arrange a meeting at the person’s business premises, which are at their private residence, to discuss this expenditure and the other tax risks that you have identified during your examination of the records.

As soon as you arrive at the property you see some newly installed automatic garage doors made by the same company whose name is on an invoice claimed as repairs to manufacturing equipment. As soon as you start the meeting you ask about the doors. The person begins to explain how they must have mixed up the invoices. You must immediately advise the person of their rights by issuing the HRA message and factsheet, see CH300500 and CH300600, and explain how penalties can be reduced, before the person continues any further with their explanation.

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Example 2 - Direct Tax

When you open a compliance check, you tell Mrs Roberts that you have information to suggest that she has not declared bank interest on her tax return and you ask her to telephone you to discuss this. You are not, however, completely certain that the interest all relates to that person because in a few cases from the same project, the interest was in fact in joint names. In these circumstances it would be incorrect to issue the HRA factsheet with the opening letter.

When Mrs Roberts telephones you she admits that she made a mistake and only declared half the interest. Before you ask any questions and before she gives an explanation about why and how the inaccuracy occurred, you must read her the HRA message, and explain how penalties can be reduced. You should also issue the relevant factsheets. See CH300500 and CH300600.

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Example 3 - Indirect Tax

During the verification of a pre-cred claim you identify that some of the invoices are false and show invalid VAT numbers. You reduce the claim by this amount. A visiting officer arranges to visit the trader following a referral to the Evasion Referral Team. We have already identified the inaccuracy and that a penalty may be due.

In these circumstances,

  • either issue factsheet CC/FS9 (GOV.UK) - The Human Rights Act and Penalties, and factsheet CC/FS7a (GOV.UK) - Penalties for inaccuracies in returns or documents, with the letter confirming the visit,
  • or issue the HRA message and relevant factsheets at the start of the visit.

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Example 4 - Indirect Tax

During a VAT check you examine Mr Hart’s books and records and establish that insufficient output tax has been returned. Before you ask Mr Hart any questions about why and how the inaccuracy occurred, or discuss penalties, you must issue the HRA message, explain how penalties can be reduced and issue the relevant factsheets, see CH300500 and CH300600.

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Example 5 - Excise

During a check of alcoholic stock at a cash & carry you identify a number of bottles of spirit that do not display a duty stamp. You must immediately issue the HRA message and explain how penalties can be reduced, before you ask any questions about why the spirits do not display a duty stamp or why and how the excise wrongdoing occurred. You should also issue factsheets CC/FS9 (GOV.UK) - The Human Rights Act and Penalties, and CC/FS12 (GOV.UK) - Penalties for VAT and Excise Wrongdoing.