CH63680 - Penalties for Failure to File on Time: Calculating the penalty: Calculation process: Unprompted disclosure calculation - example

Kelly filed her tax return 13 months after the filing date. Her failure was deliberate but not concealed. The disclosure was unprompted and does not involve an offshore matter. The tax liability (b) in her tax return is £12,000.

Step 1

The percentage for the quality of the disclosure (d) has been calculated as 80%.

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Step 2

The maximum penalty (f) is 70% and the minimum penalty (g) is 20%.

So the maximum disclosure reduction (e) is

(f) - (g) = (e)

70% - 20% = 50%.

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Step 3

The actual reduction percentage for disclosure (h) is

(e) x (d) = (h)

50% x 80% = 40%.

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Step 4

Penalty percentage (c) is

(f) - (h) = (c)

70% - 40% = 30%.

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Step 5

The penalty (a) is

(b) x (c) = (a)

£12,000 x 30% = £3,600.

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Step 6

£3,600 is larger than the minimum penalty of £300 and so is the amount of penalty incurred.