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

HMRC internal manual

Compliance Handbook

Penalties for inaccuracies: how to process the penalty: suspension of a penalty: policy objective

HMRC would rather receive accurate returns than have to enquire into inaccurate returns, and impose penalties in appropriate cases, because compliance work is expensive and time consuming. Suspension of a penalty is part of this policy and aims to turn a sanction into an incentive to comply voluntarily.

Suspended penalties are for use in the middle of the compliance spectrum where the person has failed to take reasonable care. Parliament has decided that the appropriate penalty range for such cases is between 0% and 30%.

In some cases it is likely to be more cost effective over the next few years for HMRC to allow the person to invest in improving their record keeping rather than to pay a penalty now. This will allow the person to submit accurate returns in future which in turn will allow HMRC to allocate scarce resources elsewhere.

Suspension is not simply to facilitate the person meeting their existing obligation to submit accurate returns. But suspension will not be appropriate in all cases of failure to take reasonable care. This guidance explains what factors to consider when deciding whether or not a penalty can be suspended.