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HMRC internal manual

Compliance Handbook

Charging penalties: calculating penalties: introduction

You should not attempt to calculate penalties manually but you should be familiar with how to calculate the amount of penalty to be charged. Although you will not do the calculations yourself you may have to explain the process to the person.

The penalty calculations are explained in

  • CH73520 to calculate a penalty for failure to notify
  • CH82510 to calculate an inaccuracy penalty
  • CH63600 to calculate a penalty for failure to file within 12 months and withholding information about an IT liability
  • CH62480 and CH62500 where a failure to file penalty relates to a Construction Industry Scheme (CIS) return
  • CH95550 to calculate a penalty for a VAT or excise wrongdoing.

You should put the necessary information into the Penalty Decisions and Actions Checklist (PDAC), see CH407100. The PDAC calculates the penalty and produces the penalty explanation letter NPPS100 and NPPS100(S) penalty explanation schedule.

You will also need to enter the penalty into the National Penalty Processing System (NPPS), see CH407500.

You will have to make an adjustment to an inaccuracy penalty if the person incurs an automatic failure to file penalty because the return was over 6 months or 12 months late, see CH404450.

You will have to make an adjustment to a penalty for failure to file and withholding information to deduct the amount charged automatically after 12 months, see CH403321.