Penalties for Inaccuracies: Calculating the penalty: Potential Lost Revenue: Example of allocating overstatements to PLR
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This example shows how to allocate overstatements against understatements using the stepped approach set out in CH82270.
As a result of a compliance check you establish
- understatements of tax totalling £80,000
- overstatements of the same tax in the same tax period totalling £50,000 (Step 1).
The overstatements are allocated in the following order.
|Nature of inaccuracy*||Amount (Step 2)||Overstatement allocated (Step 3)|
|Inaccuracy despite taking reasonable care||£10,000||(£10,000)|
|Deliberate and concealed||£35,000||(£ 5,000)|
So the net understatement on the return is £30,000.
This order leaves £5,000 of the overstatement to be set against the ‘deliberate and concealed’ understatement of £35,000, resulting in a penalty for an inaccuracy that is deliberate and concealed to be calculated on PLR of £30,000 (£35,000 - £5000).
*These could be single inaccuracies or grouped inaccuracies, see CH82200.