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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
Updated
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Charging penalties: interaction between penalties: when interaction happens

Interaction may occur when

  • a person incurs more than one penalty or surcharge on the same tax or
  • more than one person is liable to a penalty on the same tax liability.

A number of exceptions apply.

When a person incurs more than one penalty or surcharge on the same tax

  1. Legislation on the interaction of penalties says that a penalty for
* a failure to notify
* an inaccuracy
* a failure to notify and withholding information
* a failure to tell us about an under assessment
* a VAT or Excise Wrongdoing

must be reduced by the amount of any other penalty incurred, including the others in the list and any surcharge for late payment, if the amount of the penalty or surcharge is determined by reference to the same tax liability.

Exceptions

  • Late payment penalties do not interact with any other penalties and may be charged on the same tax liability.
  • The 12 month tax-geared penalty for failure to file is not reduced by the amount of the 6 month tax-geared failure to file penalty.
  1. FA09/Sch55/Para17 also says that the total of
* a tax geared penalty for failing to file after 6 months and
* a penalty for failing to file after 12 months and withholding information 

must not exceed 100% of the tax liability.

Exception 

The 100% limit does not apply where failure to file involves a Category 2 or Category 3 offshore matter and the tax at stake is income tax or capital gains tax. See CH62260 for guidance on the three categories of information.

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When more than one person is liable to a penalty on the same tax liability

More than one person is liable for a penalty where

  1. a person deliberately supplied false information to, or withheld information from, a person who relied on them for the information in order to make an accurate return and the person who filed the return did not take reasonable care to ensure that information supplied was correct, or complete
  2. we have evidence of both deliberate misuse of an excise product and of the product being supplied by a person who knew it would be misused.

In such situations, the total amount of the penalties must not exceed 100% of the liability to tax.

Exception 

The 100% limit does not apply where an inaccuracy involves a Category 2 or Category 3 offshore matter and the tax at stake is income tax or capital gains tax. See CH62260 for guidance on the three categories of information.