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HMRC internal manual

Compliance Handbook

Charging penalties: calculating penalties: reductions for disclosure: introduction

The purpose of reductions for disclosure is to encourage people to tell us about their inaccuracies, failures or wrongdoing so that in return they incur a lower penalty.

The law provides maximum and minimum penalty percentages for each type of culpable behaviour that leads to

  • a failure to notify, see CH73200 
  • an inaccuracy, see CH82470
  • a failure to file a return within 12 months of its due date and withholding information, see CH62160 for ITSA returns and CH62400 for CIS returns
  • VAT or excise wrongdoing, see CH94800.

The reductions for disclosure are applied to the penalty range which is the amount of the difference between the maximum and minimum penalty for the type of behaviour. The minimum is lower for unprompted disclosures and can be nil.

You will need to decide if the person has made a disclosure that can reduce the penalty.

If a disclosure has been made, you will have to determine

  • whether the disclosure was unprompted or prompted, see CH403202, and
  • the quality of the disclosure, see CH403203.