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HMRC internal manual

Compliance Handbook

Penalties for Failure to File on Time: Calculating the penalty: Penalty reductions for disclosure: Examples of unprompted or prompted disclosure

We can only consider penalty reductions for disclosures that relate to deliberate, or deliberate and concealed penalties charged after 12 months.

Example 1 - prompted disclosure

XYZ Ltd has been filing employer returns for many years. In May 2015 we write telling the company that we intend to conduct a compliance check to see whether they have met all their employer’s statutory obligations.

At the initial meeting the director discloses that the company has also been engaging subcontractors within the scope of CIS. We establish that they have been paying subcontractors since March 2013 and should have been filing contractor’s monthly returns (CIS300).

Although we started our compliance check to review the company’s employer obligations we still regard the disclosure to be prompted when calculating penalties for the CIS returns over 12 months late. This is because it would be reasonable for the company to expect that we would also ask questions about payments to other workers, which would include subcontractors.

Example 2 - unprompted disclosure

Sue files her return more than 12 months after the filing date and it contains a capital gain which she had no reason to believe we had discovered or were about to discover. As a result of an enquiry we find that Sue had sought advice in relation to the disposal but had prevented the gain from being taxed by not filing her return. The pursuit by Debt Management (DM) of fixed penalties that had already arisen in relation to this failure caused her to change her mind and submit the return. We take the view that the disclosure is unprompted.

Note that if we had become aware of the disposal and had specifically written to Sue asking for the return, then in submitting the return containing the capital gain we would take the view that the disclosure was prompted.