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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the penalty: Losses impact on potential lost revenue calculation: Losses

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 guidance on losses applies to

  • income tax
  • Class 4 NICs which are collected as if they were income tax
  • capital gains tax
  • corporation tax
  • petroleum revenue tax.

The guidance on losses does not apply to VAT, other indirect taxes, Bank Payroll Tax, Excise or other classes of NICs. The income on which these taxes and duties are chargeable can only generate a specific liability to these taxes, and not a corresponding loss.

Where there are losses, the calculation of potential lost revenue (PLR) will include any additional tax due as a result of amending the loss to the correct figure.

Incorrect losses which have no immediate tax effect will be considered for penalties at a discounted rate. The discounted rate is set by law, see CH82320.

As well as a loss, the guidance on losses applies to

  • a charge
  • an expense
  • a deficit, and
  • any other amount that

    • may be available for, or
    • relied on to claim

a deduction or relief.