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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the penalty: Penalty reductions for quality of disclosure: Telling: 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

Nathan deliberately omitted a £1.5 million capital gain from the sale of an investment property from his tax return. We opened a self assessment aspect check into the self employment pages of that tax return. Because the parts of the return we were checking and the information we requested only related to Nathan’s consultancy business, he had no reason to believe that we had discovered, or were about to discover, the capital gain. If Nathan disclosed the capital gain at this time it would be unprompted and there would be a full reduction for the telling.

By examining the sales records we discovered that Nathan was a director of a company he traded with but that he had not declared his director’s remuneration. We then told him that we were extending the check to cover all of the return. By extending our check to cover Nathan’s personal tax as well as his business tax affairs, there was now reason for him to believe that we had discovered, or were about to discover, the capital gain. If Nathan told us about the gain now it would be a prompted disclosure but he would qualify for a full telling reduction.

Six months later we found out about the capital gain and Nathan helped us calculate the liability. However, it was too late by this time to qualify for a full telling disclosure reduction.

In addition to being liable to a penalty, we published Nathan’s details on our website as he had incurred a deliberate penalty and is a deliberate defaulter. This is because he had not received a full reduction for the quality of his disclosure and met the conditions for publication, see CH190320.

Example 2

Linda deliberately omitted offshore bank interest from her tax returns for the last 10 years. We opened a full self-assessment check into her latest return. She made a full disclosure about the interest for the enquiry year.

We told Linda we would need to extend our check to earlier years. She did not tell us about the earlier years but when we sent her details of the information we had obtained from the bank, she admitted the omissions.

As the disclosure about the earlier years was only made after a significant period when Linda had access to previous targeted offshore disclosure facilities, HMRC would limit the overall reduction to the penalty to 10 percentage points above the minimum for the deliberate behaviour range. HMRC would also take this into account when considering if Linda is entitled to the full telling reduction for the enquiry year.

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.