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HMRC internal manual

Compliance Handbook

Penalties for failure to file on time: Calculating the penalty: Penalty reductions for disclosure: Timing of the disclosure

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 a disclosure through one of HMRC’s offshore disclosure facilities, they can no longer expect HMRC to give them the full reduction for the quality of disclosure. A ‘significant period’ is normally considered to be over 3 years but may be less where the overall disclosure covers a longer period.

For any disclosure made after 5 September 2016 you should now take into account the time that has passed between the filing date and the date the deliberate withholding of information resulting from the failure to file is disclosed or corrected.

When you work out the quality of disclosure, you should firstly consider timing of the disclosure by taking into account how long it has taken between the filing date and the time the person made the disclosure. If they have taken a significant period (normally 3 years) to correct or disclose the information they withheld, you should normally restrict the amount of reduction given for disclosure.

You do this by restricting the maximum reduction by 10 percentage points to reflect the time that they have taken to begin telling us about the information they withheld, before going on to work out any further reductions for the quality of telling, helping and giving.

What this means, is that you should calculate the penalty in two stages

  1. firstly you consider if the disclosure started more than 3 years after the filing date and if so restrict the maximum reduction by 10 percentage points
  2. you must then work out any further reductions for the quality of the telling, helping and giving.

For example, for an unprompted deliberate penalty involving an onshore matter, the penalty range is 20% to 70%. If, after taking into consideration the initial ‘timing’, you decide that the restriction should apply, then the penalty range will be 30% to 70%. You should then calculate the amount of the penalty reductions under Telling, Helping and Giving as normal but then apply the resulting percentage to the penalty range of 30% to 70%.

When you are processing the penalty, the NPPS system will automatically make this adjustment once you have selected the relevant box to indicate that the restriction applies. You then enter your calculated reductions as normal.  

If exceptionally a person has taken more than 3 years to act and you decide not to restrict the reductions for quality of disclosure, these decisions must be authorised by your manager or an authorising officer and the reason for not applying the restriction should be recorded in the papers.

Cases where the compliance check started within the 3 year period, but the disclosure was made after the 3 year period  

This will depend on the nature of the disclosure, but generally the initial period would be up to the point that the person started to make the disclosure. Where a partial disclosure of the information they withheld is made within 3 years period, the 10% rule would not be applied. In cases involving more than one failure to file, you should consider the rule separately for each failure.

Cases where the disclosure was made during a compliance check

In cases where the original failure to file occurred over 3 years ago but the withholding of information was only disclosed following the start of a compliance check, your decision will largely depend on the reason for the delay but it will be exceptional not to restrict the reduction where the behaviour is deliberate.