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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: penalties: abatement structure

The abatement structure is designed to arrive at

  • an accurate judgement of the appropriate amount of penalty
  • where that penalty is expressed not as a fixed amount but as a maximum, that is, an ‘amount not exceeding’.

This advice relates to ‘error’ penalties expressed as a maximum, such as

  • S98A(2)(b), and
  • S98A4

and not those under s98 where the penalty is

  • a maximum of £3000.
  • in these ‘maximum of’ cases to arrive at an appropriate penalty see COG914080.

The procedure in ‘error’ cases is to start with the maximum penalty and then reduce it by the appropriate percentages for

  • the extent of employer’s or contractor’s disclosure of inaccuracy COG914100 - abatement for disclosure and COG914105 - things to consider under disclosure
  • the extent of employer’s or contractor’s cooperation throughout the compliance check COG914110 - Abatement for cooperation and COG914115 - things to consider under cooperation
  • the seriousness of the offences established by the compliance check COG914120 - abatement for seriousness and COG914125 - things to consider under seriousness.

The statutory basis is Section 100(1) TMA 1970.

The abatement structure is how we compute the appropriate penalty, in a settlement.

You should

  • never forget that if it comes to a formal determination, any penalty can be appealed and the First-tier Tribunal can review our judgement: Section 100B(2)(b).