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HMRC internal manual

Enquiry Manual

Penalties: Introduction: "Abatement" and "Mitigation"

Both abatement and mitigation mean “reduction” in everyday speech, but they have distinct meanings in the context of our penalties which should be observed to avoid confusion.

(i) “Abatement is a before thing”

Abatement is the exercise, when dealing with a maximum-amount penalty (see EM4506), of taking that maximum and reducing it for Disclosure, Co-operation and Seriousness.

  • Abatement is HMRC’s method of arriving at the appropriate level for the penalty in any particular case, within the statutory maximum.
  • Abatement derives from TMA70/S100(1).
  • Abatement is done in contemplation of either a contract settlement (in calculating the expected offer) or a formal penalty determination.
  • The procedure is at EM6051+.

(ii) “Mitigation is an after thing”

Mitigation is the HMRC Board’s general power to reduce any penalty at TMA70/S102

A taxpayer may make a plea for mitigation of a penalty

  • after a penalty has been formally determined, and
  • after the taxpayer has exhausted (or abandoned) his appeal rights.

The procedure is at EM5310.

FA07/SCH24 introduced a new penalty regime for penalties for inaccuracies in returns and other documents relating to a tax period beginning on or after 1 April 2008 and which have a filing date on or after 1 April 2009. “Abatement” and “mitigation” do not feature in that regime. Instead, the maximum penalty for the behaviour giving rise to the inaccuracy is reduced depending upon the type and quality of disclosure. HMRC has the power to further reduce the penalty by way of a special reduction. You will find guidance on FA07/SCH24 penalties in the Compliance Handbook. CH82400+ provides detail about the reduction for disclosure and CH82490 is about the special reduction.