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HMRC internal manual

Compliance Handbook

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.


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.

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.