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HMRC internal manual

Compliance Handbook

Penalties for inaccuracies: types of inaccuracy: quality of evidence: poor co-operation

You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.

Article 6 ECHR gives a person the right not to co-operate with us when we are considering penalties, see CH300100.

A person may choose not to co-operate with us because they wish to invoke these rights or because they believe they can gain an advantage by non-co-operation. If they are seeking to gain advantage it is likely that they will have failed to co-operate from the start of the check and the overall quality of disclosure will have been poor or non-existent throughout the check.

Whatever the reason for the non co-operation you must continue to try and establish all the facts by maximising the use of our information powers. You must use these powers to try and establish all the facts that will enable you to determine the behaviour that resulted in the inaccuracy. You cannot however use these powers to request self-incriminating testimony evidence, see the penultimate paragraph of CH301000. In all other cases of non co-operation you must normally issue at least one tranche of daily penalties for failure to comply with an information notice before considering an inaccuracy penalty.

Before you assess a penalty you must try and encourage constructive discussion with the person and try to resolve any disputes, see CH280500.

You will, however, reach a stage in the check where you are going to have to take a view of the penalty position based on the limited facts that you have established. You will normally be able to determine when you reach this stage after considering

  • the specific risks that have been identified
  • whether the continued use of information powers and associated failure penalties are likely to provide us with relevant additional information
  • whether there are any impending assessing time limits.

CH281000 explains the steps you should take before you assess a penalty to try and encourage constructive discussion with the person. You must attempt wherever possible to issue any tax and penalty assessments together, see CH83040.

Evidence of behaviour

The onus of proof for penalty decisions falls upon us. A person may, however, be deliberately refusing to co-operate in the hope they will be charged a careless penalty for a deliberate or deliberate and concealed inaccuracy. Allowing such an attempt to succeed is unacceptable.

When considering whether a penalty is careless or deliberate we need to balance the view that non co-operation may be an attempt to stop us identifying the underlying behaviour against the requirement imposed by tribunals and courts for us to provide a higher quality of evidence when we are alleging dishonesty.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)