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HMRC internal manual

Compliance Handbook

Penalties for Failure to File on Time: Calculating the penalty: Penalty reductions for disclosure: Overview

A person can make a disclosure of information that has been deliberately withheld and receive a reduction in the percentage of the 12 month further penalty.

The purpose of reductions for disclosure is to give those who have deliberately withheld information an incentive to provide that information and finalise their tax liability as quickly and effectively as possible.

There is no reduction available where information was not deliberately withheld, so there is no ability to reduce

  • the 5% penalty incurred after 6 months, because this percentage applies whether or not the withholding of information was deliberate, or
  • the 5% penalty incurred after 12 months, because this percentage only applies where the withholding of information was not deliberate.

For details on the 12 month further penalty for

  • income tax, capital gains tax, bank payroll tax and registered pension schemes, see CH62160+,
  • CIS see CH62400+, and
  • machine games duty, see CH62740.

There are also higher maximum and minimum penalty percentages where the disclosure involves an offshore matter, see CH112700.

If information was deliberately withheld, whether concealed or not concealed, then the penalty percentage, see CH63200, can be reduced where the person discloses information that has been previously withheld by failing to make that return.

The amount of the reduction depends on whether the disclosure was unprompted, or prompted, see CH63140.

The amount of reduction also depends on the quality of disclosure, CH63220. A person can affect the quality of disclosure by

  • telling us about it (telling), see CH63260,
  • giving us reasonable help in quantifying the amount of tax unpaid because of withholding information (helping), see CH63280, and
  • allowing us access to records for the purpose of checking how much tax is unpaid because of withholding information (giving access), see CH63300.

The penalty percentage cannot be reduced below a minimum penalty percentage. The minimum penalty percentage is determined by

  • whether the failure was deliberate, or deliberate and concealed, see CH62160+ and CH62400+, and
  • whether the disclosure is unprompted or prompted, see CH63140.

The minimum penalty percentage for each type of failure is set out in CH63200.

If the 12 month further penalty is reduced for disclosure, it must not be reduced below

  • £300, or
  • for CIS returns,

    • £1,500 where deliberate but not concealed, and
    • £3,000 where deliberate and concealed.

If a person registered for ‘gross payment’ for CIS purposes makes a disclosure, it does not reduce the fixed amount penalties that they incur, see CH62500.

See CH63400 if a person asks for a special reduction of the penalty.