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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Penalties: Mitigation


HMRC may in their discretion mitigate any penalty, or stay or compound any proceedings for recovery thereof, and may also, after judgment, further mitigate or entirely remit the penalty. S102 only applies to penalties that have been determined and are final.

Mitigation is entirely a matter for the Commissioners for HMRC, acting through senior officers, see contact link. However, the following outline may be useful background for enquiry officers and managers where it is considered mitigation may be due.

TMA70/S102 gives HMRC a wide discretionary power to mitigate any penalty. The policy on its use is clear and longstanding. Given that Parliament has enacted the relevant penalty and the taxpayer has incurred it, HMRC will only mitigate in certain narrowly constrained circumstances. This is particularly true of fixed-amount penalties where Parliament has specified the amount and denied the tribunal the ability to alter it.

Mitigation will only be considered after

  • the penalty has been determined and the taxpayer has exhausted (or abandoned) all appeal rights, and/or
  • the failure or error that led to the penalty has been remedied or corrected.

Mitigation will then be considered in three circumstances.

  1. Where some sort of HMRC maladministration, usually delay, has caused or contributed to the size of the penalty - where delay and/or lack of co-operation by the taxpayer have caused the department additional costs that will weigh against mitigation.
  2. Where to enforce payment of the penalty would cause the taxpayer genuine and absolute hardship.
  3. Other exceptional circumstances such as the penalty or penalties being wholly disproportionate to the offence - for example a large tax-geared failure penalty under S93(5) following upon very large S93(3) daily penalties for the same offence, or belated information revealing the type of situation set out at EM5212 (“In-built” penalty).

There is no appeal against HMRC’s decision on S102 mitigation and a taxpayer wishing to litigate would need to seek Judicial Review.