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HMRC internal manual

Compliance Handbook

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

The maximum penalty percentage, see CH63200, is reduced by an amount that represents the quality of disclosure. The quality of disclosure determines the precise reduction within the particular penalty range. The more a person tells, helps or gives access to us, the more the penalty will be reduced.

To calculate the reduction for disclosure you need to consider the extent to which the person

  • told us about it, see CH63260,
  • gave us reasonable help, see CH63280,
  • allowed us access to records, see CH63300.

Where an offshore matter or offshore transfer, see CH100000, is a factor in the disclosure, Schedule 21 FA 2016 introduced a new element to the quality of disclosure for years 2016-17 and later. ‘Additional information’ is now to be taken into account alongside telling, helping and giving when considering the quality of any disclosure to HMRC. This new element only applies to offshore matters and offshore transfers. See CH117000 for further guidance.

Where a person has taken a significant period to correct their non-compliance in relation to either an onshore or offshore matter, or they would previously have been able to make their disclosure through one of HMRC’s offshore facilities, they can no longer expect HMRC to agree full reduction for disclosure. For this purpose we would normally consider a ‘significant period’ to be over 3 years or less where the overall disclosure covers a longer period.

If you consider that this may apply to your case, see CH63310 for further guidance.

When calculating the amount of the penalty for any year, you will also need to establish whether the error falls within category 1, 2 or 3, see CH112400.

As a guide you should weight the elements of disclosure as follows:

Percentage Element of disclosure
30% Telling
40% Helping
30% Giving access
 = 100% Of the total possible reduction

A return can contain a combination of information that is

  • deliberately withheld and concealed,
  • deliberately withheld but not concealed, and
  • not deliberately withheld, see CH62160+, CH62400+ and CH62740.

There may be cases where the person only makes a disclosure about some of the information that was deliberately withheld. If enquiries identify further non-disclosed information that was deliberately withheld, and possibly also concealed, then the highest applicable penalty percentage is charged to all of the tax liability that would have been shown in the return, see CH62240, CH62480 and CH62780. The reduction for disclosure is correspondingly applied to the total penalty, even though a disclosure was not made about all of the information that was deliberately withheld. However, in this case the quality of disclosure would reflect that the person had not told us everything.

For guidance on how to determine the quality of disclosure, see CH63240, and for examples see CH63320.

FA09/SCH55/PARA14 (2) & (4)