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HMRC internal manual

Compliance Handbook

Penalties for inaccuracies: how to process the penalty: suspension of a penalty: circumstances in which you might suspend a penalty: considering the indicators of likely future compliance

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

The key objective of suspension is to encourage and support a person’s future compliance. So, in deciding whether to suspend a penalty for a careless inaccuracy where you can set at least one specific suspension condition, you should consider the indicators of likely future compliance. You should consider the following.

  • What was the quality of the disclosure (telling, helping and giving, see CH82430) the person made?
  • Are there any deliberate inaccuracies in this compliance check?
  • What does the person’s compliance history show?
  • Are any returns or payments currently overdue?

It is likely that the careless inaccuracy will be identified some time before you are considering whether you can suspend the penalty. Ideally the person should improve their record keeping when you make them aware that it is unsatisfactory. So where the person takes steps to improve their record keeping during your compliance check, this will be a good indication that the person will benefit from penalty suspension.

Conversely, where the person does not take action to improve their record keeping when you make them aware that it is unsatisfactory this will be an indication that they may not benefit from penalty suspension.

Each case must be considered on its own facts and no single factor will always mean that you should decide not to suspend the penalty.

A person may be more likely to comply with the conditions of suspension if they

  • have no deliberate inaccuracies in the compliance check,
  • have made a full disclosure, and
  • have a good record of filing returns and making payments (including meeting any ‘time to pay’ arrangements).

Example

A compliance check has revealed a careless inaccuracy in Peter’s landfill tax return. Peter made a full prompted disclosure at the start of the compliance check and no other problems were found. Peter has a good history of filing returns and making payments on time. Once you identified the problem with his record keeping that caused the careless inaccuracy, Peter worked with you to improve his record keeping. It is likely from these indicators that he will comply with any suspension conditions set and so avoid a careless inaccuracy in future. Your approach to suspension also supports the objective of encouraging full disclosure.