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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the penalty: Amount of Penalty - introduction

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

The amount of the penalty is based on the Potential Lost Revenue (PLR), see CH82160. You should work out the amount of the penalty by applying an appropriate percentage to the PLR depending on whether the inaccuracy was

  • careless, see CH81130
  • deliberate but not concealed, see CH81150, or
  • deliberate and concealed, see CH81160.

Where there has been an under-assessment and the person did not take reasonable steps to tell us about it within 30 days, see CH81170.

Where the person has discovered an inaccuracy in a return or other document, see CH81060, and does not take reasonable steps to tell you about it, the inaccuracy will be treated as careless even if it was not careless at the time it was made, see CH81080.

The majority of penalties will be calculated using the standard maximum penalty rates. Higher maximum penalties may apply when offshore matters are involved, see CH82480+.

Standard maximum penalty

The standard maximum penalty due for onshore matters is as shown in the following table.

Reason for penalty Type of inaccuracy Maximum penalty payable
Giving an inaccurate return or other document Careless 30% of PLR
Giving an inaccurate return or other document Deliberate not concealed 70% of PLR
Giving an inaccurate return or other document Deliberate and concealed 100% of PLR
Inaccuracy discovered later but no reasonable steps taken to tell you Treated as careless 30% of PLR
Understated assessment not notified N/A 30% of PLR
Inaccuracy due to the deliberate behaviour of another person N/A 100% of PLR

The maximum penalty may be reduced for the quality of disclosure - see below

Higher penalty for certain offshore matters

There may be higher maximum penalty percentages for giving an inaccurate return or other document where

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

For more information about these higher penalty percentages and the circumstances in which they apply, see CH82480+.

The maximum penalty may be reduced for the quality of disclosure - see below

Reduction for disclosure - all penalties

You may reduce the penalty depending on the quality of the disclosure, see CH82400. The reduction may not reduce the penalty below a minimum amount, see CH82470.

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 CH82465 for further guidance.