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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for Inaccuracies: Calculating the penalty: Potential Lost Revenue: Single inaccuracy

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 normal rule for potential lost revenue is that it is the additional amount due or payable as a result of

  • putting right an inaccuracy, including an inaccuracy attributable to another person, see CH81075 and CH81165, or
  • failing to tell HMRC about an under-assessment, or
  • an inaccurate repayment or credit having been made by HMRC as a result of the inaccuracy, or
  • a repayment or credit that would have been incorrectly made by HMRC if the inaccuracy had not been corrected.

When calculating an amount of potential lost revenue, this has to be subject to recovery or retention by a procedure such as an assessment or formal refusal of a claim or application.

For the purposes of calculating the PLR

  • where a penalty is for 2009/10 or earlier, tax includes NIC but does not include Class 1A NIC
  • where a penalty is for 2010/11 or later, ‘tax’ includes NIC including Class 1A.

Note that different provisions apply for calculation the PLR in a case of delayed tax, see CH82390.

An inaccuracy can affect the tax due in more than one tax period. The additional amount of tax due as a result of putting right an inaccuracy includes any tax effect from that inaccuracy that arises in later or earlier tax periods.

For direct taxes, when calculating the additional amount due and payable as a result of putting right the inaccuracy, you should take into account any additional reliefs/allowances claimed or deductions due under ordinary principles of commercial accountancy or within the tax acts. See CH82180 and CH82260 where an inaccuracy results in an overstatement rather than an understatement of tax.

This includes claims made after the time limit has expired where certain conditions have been satisfied. Detailed guidance on claims made after the time limit has expired is at CH55000.

‘Repayment’ can include allowing a credit, see CH81071.

It is possible that there can be an amount of PLR where we have not repaid any part of a repayment claimed by the person.

For examples of calculating PLR for a single inaccuracy, see CH82161 and under-assessment, see CH82162.

For cases involving Corporation Tax Group Relief or Section 458(1) to (3) CTA10 (close companies - loans to participators), see CH82281 and CH82282.

Where overstated losses have been used in a claim to Group relief see CH82280.

Inaccuracies in other documents for the same period should be considered separately for penalties.