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HMRC internal manual

Penalties for Failure to Notify: Calculating the penalty: Calculation process: How to calculate the amount of penalty to be charged

Penalty calculations

Step 1

Calculate the percentage for the quality of the disclosure (a), following the guidance at CH73220.

Step 2

Having established the behaviour and whether the disclosure was prompted or unprompted, identify

• the maximum penalty (b)
• the minimum penalty (c).

You will find these

• in the table at CH73200 for most failures to notify, or
• at CH73210+ where the failure to notify involves offshore matter and the tax at stake is income tax or capital gains tax

Then calculate the maximum disclosure reduction (d).

(d) = (b) - (c)

Step 3

Calculate the actual reduction percentage for disclosure (e) by multiplying the maximum disclosure reduction (d) by the percentage for the quality of the disclosure (a).

Actual reduction percentage for disclosure (e) = (d) x (a)

Step 4

Calculate the penalty percentage (f) by deducting the actual reduction percentage for disclosure (e) from the penalty maximum (b).

Penalty percentage to be charged (f) = (b) - (e)

Step 5

To arrive at the amount of the penalty to be charged (g) apply the penalty percentage (f) to the potential lost revenue (PLR) calculated in line with CH72620.

Penalty chargeable (g) = PLR x (f)

Penalty ranges

Penalties fall into certain ranges. The disclosure reduction will determine where they fall within that range.

The penalty ranges may be different where the failure to notify involves an offshore matter and the tax at stake is income tax or capital gains tax, see CH73210+

The penalty ranges for each three categories are set out below

Category 1 - failures to notify that do not involve an offshore matter or failures to notify that involve an offshore matter in territory 1 where the stake is not income tax or capital gains tax, see CH114400.

Behaviour Penalty range for unprompted disclosure Penalty range for prompted disclosure
Deliberate and concealed 30% - 100% 50% - 100%
Deliberate but not concealed 20% - 70% 35% - 70%
Non-deliberate (disclosed after 12 months) 10%- 30% 20% - 30%
Non-deliberate (disclosed within 12 months) 0% - 30% 10% - 30%

Category 2 -failures to notify that involve an offshore matter in territory 2 where the tax at stake is income tax or capital gains tax, see CH114400.

Behaviour Penalty range for unprompted disclosure Penalty range for prompted disclosure
Deliberate and concealed 45% - 150% 75% - 150%
Deliberate but not concealed 30% - 105% 52.5% - 105%
Non-deliberate (disclosed after 12 months) 15% - 45% 30% - 45%
Non-deliberate (disclosed within 12 months) 0% - 45% 15% - 45%

Category 3 - failures to notify that involve an offshore matter in territory 3 where the tax at stake is income tax or capital gains tax, see CH114400.

Behaviour Penalty range for unprompted disclosure Penalty range for prompted disclosure
Deliberate and concealed 60% - 200% 100% - 200%
Deliberate but not concealed 40% - 140% 70% - 140%
Non-deliberate (disclosed after 12 months) 20% - 60% 40% - 60%
Non-deliberate (disclosed within 12 months) 0% - 60% 20% - 60%

Examples of penalty calculations

Examples of penalty calculations are at

• CH73540 and CH73560 for unprompted disclosure
• CH73580 and CH73600 for prompted disclosure.