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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Charging penalties: establishing penalty behaviour: evidence needed

You must not charge a penalty unless you have sufficient evidence.

When you have evaluated the evidence and come to a view, you must present your findings to the authorising officer, see CH407050.

When the penalty has been authorised you must give the person a full explanation of your conclusions about the penalty position, and a reasonable opportunity to respond, before you can charge a penalty, see CH408000. In deliberate cases this must include the implications of deliberate behaviour; that is inclusion in the Managing Serious Defaulters programme, see CH480000, and Publishing Details of Deliberate Defaulters, see CH480700.

The person has the right to appeal to the tribunal against the penalty, see CH414000.

Therefore, the evidence for every penalty must be sufficient to either

  • convince the person to accept your view of the penalty behaviour or
  • convince a tribunal that the penalty decision is correct.

The standard of proof that a tribunal uses is the civil standard of the balance of probabilities. This means that, on the evidence, it is more probable than not that

  • an inaccuracy was made carelessly or deliberately
  • a failure to notify or a VAT or excise wrongdoing was deliberate
  • a withholding of information was deliberate.

Where the decision is deliberate behaviour, the tribunal will need strong evidence to tip the balance because the courts have held that there is an inherent likelihood that any given person is honest. The standard of proof is still however the civil standard of the balance of probabilities.