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HMRC internal manual

Compliance Handbook

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

Terry has filed his return 15 months after the filing date, after being prompted. His failure was deliberate and concealed. The information withheld did not involve an offshore matter. The tax liability (b) resulting from the return is £20,000.

Step 1

The percentage for the quality of the disclosure (d) has been calculated as 70%.

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Step 2

The maximum penalty (f) is 100% and the minimum penalty (g) is 50%.

So the maximum disclosure reduction (e) is

(f) - (g) = (e)

100% - 50% = 50%.

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Step 3

The actual reduction percentage for disclosure (h) is

(e) x (d) = (h)

50% x 70% = 35%.

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Step 4

Penalty percentage (c) is

(f) - (h) = (c)

100% - 35% = 65%.

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Step 5

The penalty (a) is

(b) x (c) = (a)

£20,000 x 65% = £13,000.

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Step 6

£13,000 is larger than the minimum penalty of £300 and so is the amount of penalty incurred.