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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Penalties: Introduction: Two Types of Penalty Amounts

Every penalty falls into one of two types as regards its amount: “fixed” or “maximum”. The distinction is important because each type is quantified and handled in its own way.

(i) Fixed-amount penalties

TMA70/S100B(2)(a) refers to such a penalty as one “required to be of a particular amount”. In other words the wording of the relevant penalty provision fixes the amount

  • either at a specified sum, £x (e.g. TMA70/S93(2) £100) or
  • by a formula, and that formula may be

    • tax-gearing (e.g. FA98/SCH18/PARA18)
    • or not (e.g. TMA70/S98A(2)(a)).

Because Parliament has fixed the amount, this type of penalty is never abated (never reduced for Disclosure, Co-operation, Seriousness).

The “authorised officer”, EM5320+, TMA70/S100(1), determines the penalty at the “correct” amount, i.e. the amount specified by the particular penalty provision.

On appeal, the review officer (after consulting the Authorising Officer) or the tribunal can

  • discharge the penalty if they find there was no offence
  • confirm the penalty if it appears to them to be correct, or correct the authorised officer’s figure if it is not as specified in the statute.

However the review officer or tribunal cannot vary the amount of the penalty to an amount that they think more appropriate. TMA70/S100B(2)(a).

For information on the reviewing officer, refer to the Appeals, Reviews and Tribunals Guidance at ARTG1030 and ARTG4080.

(ii) Maximum-amount penalties

TMA70/S100B(2)(b) refers to these as “any other penalty”, but they are invariably enacted as “an amount not exceeding” a stated maximum.

That maximum may be set

  • either at a specified sum, £x (e.g. TMA70/S98(2) £3000)
  • or by a formula, and that formula may be

    • tax-gearing (e.g. TMA70/S95)
    • or not (e.g. FA98/SCH18/PARA29(1)(b)).

Because Parliament has only specified a maximum, this type of penalty is always abated (always reduced for Disclosure, Co-operation, Seriousness). The abatement exercise is simply HMRC’s method of arriving at the appropriate level of penalty, within the statutory maximum, in the circumstances of the particular case.

The “authorised officer”, EM5320+, TMA70/S100(1), determines the penalty at the “appropriate” amount.

On appeal, the review officer (after consulting the Authorising Officer) or the tribunal can

  • discharge the penalty if they find there was no offence
  • confirm the penalty if they think it appropriate
  • reduce that figure if they think it too high
  • or increase it if they think it too low: TMA70/S100B(2)(b).