Charging penalties: the penalty explanation letter
Before you charge a penalty, you must give the person
- a written explanation of your conclusions about the penalty and
- a reasonable opportunity to respond.
Keeping the person fully informed of your penalty decision, and avoiding any unreasonable delay, will ensure compliance with the Human Rights Act.
Following authorisation of the penalty, see CH407100, an NPPS1 Penalty Explanation Letter should be produced from NPPS.
The NPPS1 includes the text that you entered into NPPS about
- details of the inaccuracies, failures or wrongdoing
- evidence of the behaviour that led to the inaccuracies, failures or wrongdoing
- the facts that determined if the disclosure was prompted or unprompted
- the reasons for any reductions you have given for disclosure
- any suspension conditions and the period of the suspension.
Where agreement to suspension conditions is required, an NPPS101 must be issued with the NPPS1. The NPPS101 is produced alongside the NPPS1.
In deliberate cases you must also explain to the person the implications of deliberate behaviour; that is, inclusion in the Managing Serious Defaulters (MSD) programme see CH480000, and Publishing Details of Deliberate Defaulters (PDDD) see CH480700.
Some of the text that you enter into NPPS will be seen by the person. You must remember to use the appropriate style and wording when completing the narrative sections of NPPS, for example referring to ‘you’ and not ‘the taxpayer’.
You must give the person a reasonable amount of time to respond to the NPPS1 before issuing the NPPS2 Notice of penalty assessment, taking into account such factors as
- the complexity of the case
- the person’s possible need to seek professional advice
- any previous discussions about the penalty position.
When the penalty position has been fully explained in a meeting or during a telephone call, it will be reasonable to allow less time than in a case dealt with by correspondence, for example
- where the position is explained in a meeting or during a telephone call you should allow at least five days
- where the case is dealt with by correspondence you should allow approximately 30 days.
The actual amount of time allowed is a matter for your judgement on a case by case basis.
If you have given the person a copy of the NPPS1 at a meeting and discussed the penalty position fully, the NPPS2 can be issued immediately.
In contract settlement cases, where the penalty is explained during a settlement meeting, it is not mandatory to issue the NPPS1, unless the penalty is suspended. If you do not use the NPPS1, an alternative record must be kept of the information and explanation given to the customer, which must include MSD and PDDD in deliberate cases. In contract settlement cases it is important that the customer fully understands what they are signing up to, including the implications of a penalty for deliberate behaviour.
If a contract settlement includes a suspended penalty, then you must issue the NPPS1. This is because the NPPS1 is the written record of the suspension conditions that is referred to in the letter of offer, see EMapp1 Letter 1A.