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HMRC internal manual

Compliance Handbook

Penalties for Failure to Notify: Calculating the penalty: Penalty reductions for quality of disclosure: Determining the quality of disclosure

To arrive at the disclosure reduction you need to assess the quality of each of the three elements of the disclosure, see CH73220, by reference to

  • timing
  • nature, and
  • extent.

The guidance at CH73300, CH73320 and CH73340, provides examples of the circumstances that you will need to take into account when considering failure to notify situations.

When you have taken all relevant factors into account the percentage you have arrived at by totalling the three elements of the disclosure (telling, helping and giving access, see CH73220) will reflect the overall quality of the disclosure. Consider any representations made by the person. They may be able to offer evidence which leads you to a different view of the disclosure.

At this point you should take time to consider whether the disclosure reduction is reasonable taking into account all the circumstances of the case. But remember that the penalty percentage must sit between the maximum and minimum levels set by law for the behaviour.

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.

You should then use this percentage to calculate the amount of penalty to be charged. For guidance on the process to follow, see CH73520.

There will be cases where the circumstances are such that little in the way of telling, helping and access is needed to establish the reasons for the person’s failure and the amount of the tax unpaid or tax the person is liable for because of the failure.

You should allow the full reduction for those elements of the disclosure that are not required.

For example

You may hold reliable third party information that clearly identifies a source of income and the amount of the income that a person has not told us about. The person need only tell you about the circumstances that gave rise to the failure to qualify for the maximum reduction for ‘telling’ and ‘helping’.

This telling should include enough detail to give you assurance that there are no other sources of income that the person has failed to tell us about.

If you decide that no further documentary evidence is required the person should be given the maximum reduction for ‘giving access’.

There are overlaps between the three elements of disclosure so that a single course of action may qualify for a reduction under more than one heading. Equally a failure to do something or a misleading action may result in a loss of reduction points under more than one heading.