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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: How to Process the Penalty: Suspension of a penalty: Suspension conditions: Conditions must be SMART

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

Any condition of suspension that you set must be SMART. Setting SMART conditions ensures that the conditions are achievable for the person and that we can verify whether or not the conditions have been met once the suspension period has expired.

  • Specific - the condition must be directly related to the business or individual being penalised. The aim of suspension is to encourage better future compliance from the person. Unless a suspension condition is directly related to the person it cannot achieve that aim.
  • Measurable - the person needs to be able to show that conditions have been met. At the end of a suspension period the onus is on the person to satisfy HMRC that they have met the condition. Unless you set a condition that is measurable, the person will not be able to do this.
  • Achievable - the person must be able to meet the conditions. The aim is to encourage future compliance so there is no point in setting a condition which a person can never meet.
  • Realistic - we cannot set a condition that would be unreasonable for the person to comply with. Unreasonable here does not only mean unreasonable in terms of costs. But you must be especially aware that a condition might mean that the person may have to incur extra costs on professional fees, new accounting systems or training. It is for the person to decide how best to meet the suspension conditions. You must take care when setting a condition to make sure you act in a proportionate and reasonable way.

For example, in a small business with a limited number of transactions you cannot set a condition requiring a business to employ a full-time member of staff in order to manage, oversee or ensure the recording or identification of transactions. It would not be economically realistic for the business to do so.

Where the person agrees to a specific condition and associated expense there should be no problem. However, where the person does not agree to the specific condition, you cannot impose a condition that requires the person to incur costs.

  • Time bound - the conditions must be met by the end of the suspension period. The suspension period cannot exceed 2 years.