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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the Penalty: Penalty reductions for quality of disclosure: Calculating the reduction for disclosure - examples

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

Example 1

Peter made an unprompted disclosure of an inaccuracy that was deliberate but not concealed. It did not involve an offshore matter.

The maximum penalty is 70% and the minimum penalty is 20%, see CH82470.

The quality of the disclosure was decided as

Telling 20% (of the full 30% see CH82440)
Helping 25% (of the full 40% see CH82450)
Giving access 20% (of the full 30% see CH82460)
Total 65% (of the full 100%)

So the quality of disclosure is 65%.

The maximum and minimum percentages could be higher if Peter’s inaccuracy involved an offshore matter and the tax at stake was income tax or capital gains tax, see CH82480+.

Example 2 

In this case, the inaccuracy Peter was disclosing was for 2012-13 and related to an investment in an offshore territory in category 1. He had chosen not to correct the inaccuracy earlier, but due to the introduction of much greater automatic exchange of information decided to make a full unprompted disclosure of the deliberate inaccuracy.

For a deliberate inaccuracy in a category 2 jurisdiction, for a period before 2016-17, the maximum penalty is 105% and the minimum penalty is 40%. However in this case as Peter had waited a significant period to tell HMRC about the inaccuracy and would have had access to targeted offshore disclosure facilities, HMRC would not expect to reduce the penalty any lower than 30% even with full cooperation. If Peter did not cooperate fully after the disclosure was submitted even higher penalties may be due.

NOTE - 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.