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HMRC internal manual

Compliance Handbook

Charging penalties:charging penalties: introduction: offshore asset based penalties: reductions for disclosure - quality of disclosure

You can reduce the penalty if the customer does all of the following things:

  • makes a disclosure of the inaccuracy or failure relating to the underlying penalty
  • provide us with a reasonable valuation of the asset
  • provide us with information or access to records that we require for the purposes of valuing the asset.

The amount of the reduction for disclosure needs to be calculated to reflect the quality of the disclosure made.

Quality includes the timing, nature and extent of the disclosure.

When calculating penalties you take account of how long it took them to come forward. If they took a significant period (normally three years) to tell you about the offshore asset you will not normally give full reduction for disclosure. You must consider the earliest date they could have told you about the asset to the actual date they did so.

To help with the calculation process, these elements have been allocated the following percentages within the total allowable reduction

Timing Up to 30%
Nature Up to 40%
Extent Up to 30%
Total 100% maximum reduction

You must decide what percentage to allow for each of the three elements.

To get a full reduction the customer must have

  • co-operated fully with HMRC
  • provided all information within their power and
  • helped HMRC to resolve the matter without any unnecessary delay. 

Partial cooperation, partial disclosure and delay will result in a lower penalty reduction.

You would give little or no penalty reduction if the customer

  • chose not to cooperate or
  • was obstructive.