Penalties: formal assessments and determinations: 'in-built' penalty
When amendments, discovery assessments or other assessments were issued, they will have been made to the best of the officer’s judgement at the time.
Sometimes either the taxpayer accepts these assessments without appealing, or the tribunal will confirm them as being correct based on the officer’s best judgement.
If we have not been able to consider penalties until the tax position is final, we may have received further information by the time we are considering penalties and we may now believe to the best of our judgement, that the tax assessments were excessive.
In that sense, the tax figures themselves could be said to contain an “in-built penalty” already.
It is HMRC’s policy to take such amounts into account when considering formal penalty determinations or assessments. You should therefore identify and comment on any such elements in NPPS, when the penalty is being authorised or on an AO Report Form, see EM5205.