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HMRC internal manual

Compliance Handbook

Penalties for Failure to Notify: Calculating the penalty: Introduction

The penalty for failure to notify, see CH71220, is based on the amount of tax or duty unpaid or tax the person is liable for because of the failure. This is the potential lost revenue, or PLR, see CH72620.

You must work out the amount of the penalty by applying an appropriate percentage to the PLR depending on whether the failure to notify is

  • deliberate and concealed, see CH72120
  • deliberate but not concealed, see CH72160, or
  • non-deliberate, see CH72200.

Most penalties will be calculated using the standard maximum penalty ranges, see CH73200. Higher penalties may apply when offshore matters or offshore transfers are involved, see CH114100+ and CH114600.

Standard maximum penalty

The standard maximum penalties for onshore matters are shown below.

Type of failure Maximum penalty payable
Deliberate and concealed 100% of PLR
Deliberate not concealed 70% of PLR
Non-deliberate 30% of PLR

These apply to onshore matters for all periods and Category 1 offshore matters up to and including 2015-16.

The ranges for offshore matters and offshore transfers, see below, only apply to income tax and capital gains tax.

Higher penalty for certain offshore matters

There may be higher maximum penalty percentages for a failure to notify where

  • the failure involves an offshore matter or offshore transfer and
  • the tax at stake is income or capital gains tax.

For more information about the penalty ranges for offshore matters, see CH114600. For details of when they apply, see CH114100+. 

Reduction for disclosure - all penalties

You may reduce the penalty depending on the quality of the disclosure, see CH73220. The reduction may not reduce the penalty below a minimum amount, see CH73200.

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.

If you consider that this may apply to your case, see CH73360 for further guidance.

FA08/SCH41/PARA6 (1)