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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Calculating the Penalty: Calculation Process: How to calculate the amount of penalty to be charged

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

Penalty calculation
Penalty ranges
Examples of penalty calculations

Penalty calculation

Step 1

Calculate the percentage for the quality of the disclosure (a), following the guidance at CH82430.

Step 2

Having established the behaviour and whether the disclosure was unprompted or prompted, identify the 

  • the maximum penalty (b)
  • the minimum penalty (c).

You will find the standard maximum and minimum penalties (the penalty range) for most inaccuracies in the table below and at CH82470.

These standard rates apply to onshore matters for all periods and Category 1 offshore matters up to and including 2015-16.

Where the inaccuracy involves an offshore matter or offshore transfer and the tax at stake is income tax, capital gains tax or inheritance tax, see the table at CH116600.

The ranges for offshore matters only apply to income tax, capital gains tax and inheritance tax.

Then calculate the maximum disclosure reduction (d).

(d) = (b) - (c )

Step 3

Calculate the actual reduction percentage for disclosure (e) by multiplying the maximum disclosure reduction (d) by the percentage for the quality of the disclosure (a).

Actual reduction percentage for disclosure (e) = (d) x (a)

Step 4

Calculate the penalty percentage (f) by deducting the actual reduction percentage for disclosure (e) from the penalty maximum (b).

Penalty percentage to be charged (f) = (b) - (e)

Step 5

To arrive at the amount of the penalty to be charged (g) apply the penalty percentage (f) to the potential lost revenue (PLR) calculated in line with CH82150 onwards.

Penalty chargeable (g) = PLR x (f)

Penalty ranges

Penalties fall into certain ranges. The disclosure reduction will determine where they fall within that range. See CH116600 where the inaccuracy involves an offshore matter and the tax at stake is income tax, capital gains tax or inheritance tax.

The standard penalty range for inaccuracies that do not involve an offshore matter are set out below.

Behaviour Penalty range for unprompted disclosure Penalty range for prompted disclosure
Careless 0% - 30% 15% - 30%
Deliberate but not concealed 20% - 70% 35% - 70%
Deliberate and concealed 30% - 100% 50% - 100%

Examples of penalty calculations

Examples of penalty calculations are at