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: Example of decision and notice to suspend a penalty

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


You have assessed penalties of £11,000 on Mike, a newsagent, made up as follows.

  • £6,000 relating to careless inaccuracies.
  • £4,000 relating to a deliberate inaccuracy that was not concealed.
  • £1,000 relating to a deliberate inaccuracy that was concealed.

Considering what you can suspend


You must exclude any part of the penalty relating to anything other than a careless inaccuracy. £5,000 does not relate to careless inaccuracy. So the maximum amount that you can consider for suspension is £6,000.

Step 2

From the £6,000, you must now exclude any penalties for inaccuracies for which conditions cannot be set. The £6,000 stems from the following careless inaccuracies.

  Nature of careless inaccuracy Amount Notes
A Private use of motor expenses £2,000 Resulted from poor record-keeping which remains unsatisfactory and for which remedial action is required.  You can set a condition to help Mike avoid a further penalty for this.
B Own goods not recorded £2,000 Resulted from inadequate records.  Mike has taken remedial action before you can assess the penalty.  You will still include this remedial action in the conditions for the notice of suspension.
C Advertising notices placed in window not recorded in turnover £500 Resulted from poor record-keeping and remedial action required.  You can set a condition to help Mike avoid a further penalty for this.
D Capital gain £1,500 Arose on one-off sale of assets that will not re-occur because Mike has no further assets that could be sold.  As no suspension condition can be set, see CH83143, no further action is required.


Decision as to what you can suspend

You can therefore only suspend penalties in respect of A, B and C. This means that of the £6,000 inaccuracy penalties only £4,500 is eligible for suspension.

None of the careless inaccuracies arise from the use of avoidance schemes.

You consider the likelihood of Mike complying with the suspension conditions you propose to set. You note that Mike has incurred other penalties from deliberate behaviour in the compliance check. However, Mike has made a full disclosure when prompted and has a very good record of filing and paying on time. He has even demonstrated a positive attitude towards future compliance by putting steps in place to improve some aspects of his record-keeping before you were able to set suspension conditions. On balance you decide there is no reason why you should not suspend the penalty.

The penalty assessment(s) will cover all of the penalties for all of the inaccuracies. You can only suspend £4,500 of those penalties on the assessment(s) for inaccuracies A, B and C.

This leaves penalties of £6,500 to be collected (£1,500 for careless inaccuracy, £4,000 for deliberate inaccuracy and £1,000 for concealed deliberate inaccuracy).

Notice to suspend a penalty

You must set out the following on the notice.

  • Each of the penalties for A, B and C and that you intend to suspend the whole amount of the penalty for each of those inaccuracies.
  • The conditions that you set:

    • Mike must put in place a record-keeping system or alternatively a reliable sampling exercise that will allow him to identify or accurately estimate any private use of motor expenses within 1 month of the date of the notice to suspend the penalty.
    • Mike must continue to give effect to the remedial action that he has already taken to record his taking of own goods from the business over the next 12 months.
    • Mike must put in place a record-keeping system that will allow him to record accurately amounts of income from advertising notices within 1 month of the date of the notice to suspend the penalty
    • Mike must file all his returns on time during the suspension period.
  • The suspension period. This will need to be at least 12 months in order for Mike to satisfactorily comply with the second condition.