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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for Failure to Notify: Calculating the penalty: Penalty reductions for quality of disclosure: Introduction

The penalty chargeable for a failure to notify, see CH71220, is calculated by applying an appropriate percentage to the potential lost revenue (PLR).

The maximum penalty percentage, see CH73200, depends on whether the failure to notify was deliberate and concealed, deliberate but not concealed or non-deliberate.

The maximum penalty percentage can be reduced depending upon the quality of disclosure, CH73220. A person makes a disclosure by

  • telling us about it (telling), see CH73300,
  • giving us reasonable help in quantifying the amount of tax unpaid because of the failure (helping), see CH73320, and
  • allowing us access to records for the purpose of checking how much tax is unpaid because of the failure (giving access), see CH73340.

The penalty percentage cannot be reduced below a minimum amount which is determined by

  • the type of failure, see CH72100, and
  • whether the disclosure is unprompted or prompted, see CH73120, and
  • for non-deliberate failures only, the time at which the disclosure is made, see CH73180.

The maximum and minimum penalty percentages for each type of failure are set out in CH73200. However, where the failure to notify involves an offshore matter and the tax at the stake is income tax or capital gains tax you must use the guidance on maximum and minimum penalty percentages at CH73210+.

Where a person has taken a significant period to correct their non-compliance, 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. In such cases it is unlikely that HMRC would reduce the penalty more than 10 percentage points above the minimum of the statutory range.  For this purpose we would normally consider a ‘significant period’ to be over three years or less where the overall disclosure covers a longer period.

See CH73400 if a person asks for a special reduction of the penalty.