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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for inaccuracies: how to process the penalty: suspension of a penalty: suspension conditions: where suspension conditions are not agreed

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

In the vast majority of cases you are likely to agree with the person through discussion

  • whether a penalty is eligible for suspension, and
  • the suspension conditions.

You should record the agreement to these two points in writing.

But there will be cases where there is disagreement.

Disagreement about decision not to suspend

Where the disagreement is about our decision not to suspend the penalty and the disagreement cannot be resolved you should

  • write to the person setting out your decision not to suspend the penalty and let them know they can appeal against our decision
  • assess the penalty.

The notice of penalty assessment is the appealable decision that HMRC have decided not to suspend the penalty.

Disagreement about suspension conditions

In most cases where the person does not agree your proposed suspension conditions it will not be appropriate to suspend the penalty. This is because the person is unlikely to comply with conditions that they have not agreed to. It will be rare for HMRC to impose suspension conditions where the person doesn’t agree to them.

Occasionally you may propose, for example, three specific conditions but the person only agrees with two of them. If you consider that, on balance, the person will still comply with all of the conditions, even though they only agree with some, you can still suspend using the unagreed suspension condition(s).

In these circumstances you should

  • write to the person setting out your proposed conditions for suspension
  • then assess the penalty and suspend it, and
  • then write to the person again to notify them about your unagreed suspension conditions in the amounts and terms agreed by your authorising officer. This is to protect the person’s right to appeal against the suspension conditions.

Where you cannot agree some of the specific conditions with the person, you should ensure that the conditions that you do impose are reasonable and proportionate. The tribunal would expect HMRC to act in a reasonable and proportionate way when imposing suspension conditions. For example,

  • you should not impose a condition such as ‘the person must install a computerised accounting system to ensure that all VAT input tax claims are correct’ because this would involve substantial expense, but
  • you should instead phrase the condition as ‘the person should improve their accounting systems so that all VAT input tax claims are correct’.

Resolving a disagreement

The person can appeal against your decision not to suspend the penalty or against your proposed suspension conditions and the matter can be resolved by agreement, by review or by the tribunal, see CH83190.