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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Charging penalties: establishing penalty behaviour: identifying the penalty risk

Consideration of the potential to identify behaviour that attracts a penalty needs to start at the planning stage of your compliance check. At this point it can be called a penalty risk.

When you are planning how you will address an identified tax risk, you should also identify the penalty risk. You need to plan what questions to ask if you find a failure to notify, an inaccuracy, withholding of information or VAT or excise wrongdoing.

Information and other factors to inform the penalty risk when you are planning your compliance check could include

  • the risk assessment supplied by RIS
  • third party information or other intelligence
  • the person’s compliance history
  • the compliance risks associated with the type of business. General guidance about specific business activities can be found in TIPS.

You will usually become clearer about the nature of the penalty risk as the compliance check progresses.

The more serious the potential behaviour, the more preparation will be required to ensure that sufficient evidence is gathered.

Section CH402250 gives guidance on preparing and asking questions.

For examples of how to address risks of deliberate behaviour, see CH402330.