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HMRC internal manual

Compliance Handbook

Penalties for Inaccuracies: Other penalty issues: Partnership penalties: Example of calculating potential lost revenue for partnerships

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


A partnership submits an SA return for the year 2010-11 reflecting profits of £50,000.

The profits are shared by the partners on the following basis

Partner A £20,000
Partner B £20,000
Partner C £10,000

Following an enquiry into the return the profits are increased by £10,000 and the revised profits of £60,000 are shared as follows.

Partner A £24,000
Partner B £24,000
Partner C £12,000

Each partner is due to pay income tax at 22% and Class 4 NIC at 8% on their additional share of the profits.

For the purpose of calculating the penalty due from each partner, the potential lost revenue (PLR) is as follows.

Partner A £24,000 - £20,000 = £4,000 x 30% = £1,200
Partner B £24,000 - £20,000 = £4,000 x 30% = £1,200
Partner C £12,000 - £10,000 = £2,000 x 30% = £600

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)