CH404625 - Charging penalties: interaction between penalties: details and examples: misuse of rebated oils penalties exceed 100% of the liability to tax
More than one penalty can be charged on an amount of Potential Lost Revenue (PLR) in respect of both the supply and use of a product that attracts a higher duty. For example, when
- a product is used that attracts a higher rate of duty and
- the supplier knew that it would be misused
both are liable to a penalty.
If the sum of the two penalties exceeds 100% you must reduce each penalty proportionately, as shown in the example below.
Guidance on making adjustments to penalties in the NPPS is at CH407720.
Example
Jim is a farmer and uses red diesel to run his tractors and other farm plant and machinery. Jim sells some of his red diesel to his friend George who runs a removals business, despite knowing that George uses it in his lorries.
George is liable to a penalty for using a product for a purpose that attracts a higher rate of duty, see CH91400. It is established that George’s behaviour is deliberate with a prompted disclosure and you determine a penalty of 45% of the PLR.
Jim is liable to a penalty for supplying the oil knowing that it will be used for a purpose that attracts a higher rate of duty. The penalty for this wrongdoing is 100%, subject to any reduction for disclosure. As Jim made a prompted disclosure you determine a penalty for this wrongdoing of 70% of the PLR.
The PLR is the same for both Jim and George.
Therefore, the total penalty is 115% (45% plus 70%).
As the total of the penalties charged cannot be more than the PLR, each penalty must be reduced, see below.
| Name | Calculation | Percentage |
|---|---|---|
| George | 45/115 x 100 = | 39% |
| Jim | 70/115 x 100 = | 61% |
If the penalties determined were 35% for George and 60% for Jim, as the total penalty does not exceed 100% of the PLR, no reduction would be necessary.