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HMRC internal manual

Compliance Handbook

Charging penalties: recording and calculating penalties on the National Penalties Processing System (NPPS): amending or cancelling a penalty case in NPPS: appeals: reduce a penalty to nil

You may need to reopen a case following an appeal to reduce the amount of the penalty to nil.

Reopen the case in NPPS using the ‘Appeal’ function, see COG91520.

Enter details of the appeal, see COG91540 including the amount of the appeal to be stood over, see CH407850.

To stand over a VAT penalty, you will need to set the ‘appeal indicator’ in the VAT mainframe.

Once you have resolved the appeal with the person, select Apply variation to Penalty from the Take Action dropdown menu, see COG91600. Submit.

This will take you back to the Maintain Penalty Details screen where you will amend details of the penalty, get the case approved and then authorised, see CH407740.

Where a penalty is reduced to nil, the NPPS does not generate an amended Notice of Penalty Assessment (NPPS2). You must complete a manual NPPS2 and send it to the person. In addition, you must issue a manual ‘Withdrawal, Cancellation or Amendment of Penalty Assessment (NPPS4)’ and select the appropriate option to explain the reason for the amendment. Manual NPPS letters are available in SEES>Penalties Toolkit>NPPS Letters.

Note: Where

  • the type of inaccuracy has been changed from careless to mistake despite taking reasonable care or
  • a failure or wrongdoing becomes one that does not attract a penalty, for example where the person has a reasonable excuse

the penalty must be cancelled see CH407845, not reduced to nil.

Where a charge has been created on SAFE, details of the amendment will be sent from NPPS to SAFE.

If you reduce a VAT penalty to nil you will need to update the VAT mainframe, see CH407960.

You can then resolve the case, see COG91040.