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HMRC internal manual

# Penalties for VAT and Excise Wrongdoing: Calculating the Penalty: Calculation process: How to calculate the amount of penalty to be charged

## Step 1

Calculate the percentage for the quality of the disclosure (a), following the guidance at CH94850.

## Step 2

Having established the behaviour and whether the disclosure was prompted or unprompted, identify from the table at CH94800

• the maximum penalty (b)
• the minimum penalty (c).

Then calculate the maximum disclosure reduction (d).

(d) = (b) - (c )

## Step 3

Calculate the actual reduction percentage for disclosure (e) by multiplying the maximum disclosure reduction (d) by the percentage for the quality of the disclosure (a).

Actual reduction percentage for disclosure (e) = (d) x (a)

## Step 4

Calculate the penalty percentage (f) by deducting the actual reduction percentage for disclosure (e) from the penalty maximum (b).

Penalty percentage to be charged (f) = (b) - (e)

## Step 5

To arrive at the amount of the penalty to be charged (g) apply the penalty percentage (f) to the potential lost revenue (PLR) calculated in line with CH94250.

Penalty chargeable (g) = PLR x (f)

The penalty should be rounded down to the next £1.

Penalties therefore fall into certain ranges. The disclosure reduction will determine where they fall within that range.

Behaviour Penalty range for unprompted disclosure Penalty range for prompted disclosure
Deliberate and concealed 30% - 100% 50% - 100%
Deliberate not concealed 20% - 70% 35% - 70%
Non-deliberate* 10% - 30% 20% - 30%
Supply of product knowing it will be misused* 30% - 100% 50% - 100%
• Please note that these ranges do not apply to Landfill Tax wrongdoings