Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the Penalty: Penalty reductions for quality of disclosure: 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 penalty is calculated as a percentage of the Potential Lost Revenue (PLR), see CH82150.

The maximum percentage depends upon whether the inaccuracy was careless, deliberate, or deliberate and concealed, see CH81110.

The maximum percentage may be reduced depending on the quality of the disclosure.

A person makes a disclosure by

  • telling HMRC about it (telling), see CH82440
  • giving HMRC reasonable help in quantifying the amount of the inaccuracy or under-assessment (helping), see CH82450, and
  • allowing HMRC access to records for the purpose of ensuring that the inaccuracy or under-assessment is fully corrected (giving access), see CH82460.

The penalty percentage cannot be reduced below a set minimum for each type of inaccuracy. The minimum penalty percentage is dependent upon whether the disclosure was unprompted or prompted, see CH82420.

The maximum and minimum penalty percentages are set out in CH82470. However, where the inaccuracy involves an offshore matter and the tax at stake is income tax or capital gains tax you must use the guidance on maximum and minimum penalty percentages set out in CH82480+.

This reduction of the maximum penalty applies to

  • an inaccuracy in a return or other document (whether the inaccuracy was made by the person, see CH81070, or as a result of another person deliberately giving false information or deliberately withholding information, see CH81071), and
  • a failure to take reasonable steps to tell us about, an under-assessment within 30 days.

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.

A disclosure of an inaccuracy can be made by the person whose return or other document is inaccurate. You should not assume that an inaccuracy was made carelessly simply because a person has made a disclosure. You will need to establish the behaviour that led to the inaccuracy by considering the underlying facts and circumstances.

A disclosure of an inaccuracy can also be made by another person. Where another person (T) has deliberately given the person (P) false information, or deliberately withheld information, with the intention of P’s return or other document containing an inaccuracy, T may be liable to a penalty, see CH81075. T can disclose the inaccuracy to us. T does not necessarily have to tell P about the inaccuracy.