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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: How to Process the Penalty: What the assessment must include

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

A penalty assessment must include

  • the date of the assessment
  • the amount of the penalty
  • the legislation under which the penalty is assessed
  • the amount of any penalty suspended
  • the tax period or claim to which the penalty relates.

The penalty assessment notice also has a section explaining the appeal rights.

You can include one or more penalty assessments in a single penalty assessment notice (NPPS2). You must however include a separate entry in the notice in relation to

  • each inaccurate document, and
  • for each separate period.

Where there is more than one inaccuracy penalty arising from a document, you must include these separately in the penalty explanation letter (NPPS100) unless those penalties can be grouped in accordance with CH82200. However penalties relating to different documents must not be grouped in any circumstances, see CH83020.

Sometimes the tax period is just one day.

  • For Inheritance Tax, the tax period is the date of death or other event that gives rise to the inheritance tax charge in connection with which the penalty is payable.
  • Where the tax period is one day you show that date as both the start and the end date on the assessment.

Where a person is liable for two or more penalties relating to PAYE returns, or for two or more penalties relating to CIS returns, and the penalties are assessed for more than one tax period, then instead of having to state each individual tax period in the notice of assessment you only need to state the tax year or the part tax year to which the penalties relate.

Be careful when you are dealing with a partnership.

  • For the purpose of most taxes, duties or levies, a partnership is treated as a person in its own right. If the penalty assessment relates to those taxes, duties or levies, it should be issued to the partnership.
  • For income tax, capital gains tax and corporation tax, a partnership does not have a liability. The liability is shared amongst the relevant partners for the year of assessment involved. See CH84730 where the penalty relates to an incorrect SA partnership return.