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HMRC internal manual

Compliance Operational Guidance

Our Conduct and Behaviour: customer service to disabled people: how to help: penalty decisions

The starting point for any compliance check is that HMRC has a duty to collect the correct amount of tax as required by statute and has limited powers to decide to do otherwise. Where the person has a disability you must still assess any outstanding tax and penalties due. However, you must take into account the impact of any impairment on the person’s ability to comply with their tax obligations when, for example, considering the risk of evasion, (This content has been withheld because of exemptions in the Freedom of Information Act 2000) or establishing penalty behaviours, see CH402000.

If a person has a reasonable excuse for not meeting their tax obligations and they have rectified the failure without unreasonable delay after the excuse has ended, then certain penalties will not apply. This includes the penalties for

  • non-deliberate failure to notify, see CH71500
  • non-deliberate VAT and Excise wrongdoing, see CH92000
  • failure to file on time, see CH61500
  • failure to pay on time, see CH155500

Penalties for inaccuracies, see CH80000, will not apply where a person has taken reasonable care.

Having a disability is not, of itself, an excuse for a person failing to meet their tax obligations; it may mean that they had taken as much care as they could or that they had a reasonable excuse.

You must consider every inaccuracy or failure on its own facts and where a person has a disability, whether or not it is covered by the Equality Act, you should always consider whether it amounts to reasonable care or reasonable excuse.

When considering whether a person

  • had a reasonable excuse or
  • made an error despite taking reasonable care

because of their disability, you must consider how and why their disability prevented them from complying with the tax requirement. You will also need to take account of whether the limitation caused by the disability was beyond the normal differences that exist between people.

When considering ‘reasonable care’ you must consider the person’s particular abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims. See CH81120 for what is ‘reasonable care’.

When considering ‘reasonable excuse’ you must consider the particular circumstances in which the failure occurred and the particular circumstances and abilities of the person who has failed.

You must also consider whether HMRC has already made all the necessary reasonable adjustments for the person, by making services accessible, see COG11380 for further details of services available.

See CH71540 for failure to notify penalties and CH92000 for VAT and Excise wrongdoing penalties.

Any cases of doubt or difficulty regarding ‘reasonable excuse’ or ‘reasonable care’ should be referred to TAA, Direct Tax Technical Queries (CenPOL).

If you have evaluated all the evidence and concluded that a penalty is due you must continue to consider the impact of the person’s disability when calculating the amount of any reduction for disclosure, see CH403203. This means that when you are considering the quality of disclosure you must consider how their disability affected their helping, telling and giving. You should note that HMRC’s failure to make a reasonable adjustment under the Equality Act is not, by itself, a reasonable excuse. It is only a reasonable excuse if the failure to make that adjustment prevents the person from complying. However, you must always take steps to make any reasonable adjustments that are required to help the person comply with tax obligations in the future, see COG11380.

Refer to COG11372 for examples where a person’s disability has been taken into account when establishing penalty behaviours.