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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Penalties: Information Returns: Failure to Provide Information etc - Information Received

When the outstanding return is received it should be dealt with promptly and checked for correctness and completeness.

If there is an open appeal against the determination of continuing penalties this will remain to be settled by agreement if possible. Your objective was to obtain the return not penalties and that object will have been accomplished. Nevertheless, the penalty was determined originally for a period before the return was submitted and therefore it can often be right to continue to impose it. This will be so particularly where the taxpayer deliberately delayed the return to be obstructive or to seek to obtain some advantage.

You can settle an open appeal by

  • withdrawal of the appeal by the taxpayer
  • agreement under TMA70/S54
  • hearing by the tribunal.

If the taxpayer indicates that he no longer wishes to pursue the appeal or he is willing to pay the penalty determined, he should be invited to withdraw the appeal.

Where the taxpayer continues to seek a reduction or cancellation of the penalty you should carefully consider any claims or explanations put forward, but they will not normally justify removing the penalty entirely.

You should only reduce penalty to nil where

  • you are satisfied that the taxpayer had a reasonable excuse for the failure and put this right without delay after the excuse ended EM5152+. Serious illness, or severe domestic distress might well amount to a reasonable excuse but it will be rare for this to have continued throughout a long period of failure and several requests or warnings to complete the return
  • it is clear that the imposition of any penalty would cause real financial hardship.

Nevertheless, there will be cases where it will be appropriate to agree a reduction in the penalty provided the taxpayer’s affairs are up to date.

If you consider that the reduction in the penalty is justified you should seek to agree this under TMA70/S54.

You must not reduce the initial penalty awarded by the tribunal or any daily penalties determined by the tribunal on appeal.