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HMRC internal manual

MLR1 Penalties Guidance

Penalties guidance: the penalties and sanctions escalator

Where there are breaches of the regulations, officers must always consider imposing penalties or sanctions against the business or individual(s) who controls the business. These must mirror the requirements of the Regulations and must be effective, proportionate and dissuasive. In the event of continued non-compliance, the sanctions should become progressively stronger and this may include, for example increasingly large penalties to possible withdrawal of fit and proper status, suspension or cancellation of registration, prohibition on management and criminal prosecution. Our message to those who fail to comply is simple. We will issue dissuasive penalties and consider other sanctions for continuing non-compliance.

Officer Liability

Where an officer is knowingly concerned in a contravention, from 26 June 2017, HMRC may make them liable for some or all of a civil penalty, or equally liable where there is more than one officer.

The “business” penalty will be calculated as normal, for example a compliance penalty or a registration penalty.

HMRC may make any officer liable to pay a penalty.  However, a person who is in control or a member of the senior management will normally be the type of officer that HMRC will consider liable for a penalty or prohibit from management. 

An officer may have to pay some or all of the business’s penalty if the failures are due to their actions, and one or more of the following applies:

  • they are responsible for the contraventions
  • they have gained, or attempted to gain, personally from a deliberate contravention
  • the business is, or we believe it is, about to become insolvent - even if the officer didn’t gain personally from the deliberate contravention
  • the business has a history of non-payment of fees or penalties 

If the business pays the penalty, HMRC will not ask the individual officers to pay.

In the case of a beneficial owner, officer, manager or sole practitioner who must be approved under Regulation 26 and an officer of a business under Regulation 78 who has been prohibited from management, the individuals concerned have obligations to comply with the requirements in any case, so the liability to a penalty will rest with and be payable by that individual.

The business may receive a seperate penalty where they fail to take reasonable care in relation to an individual and allow them to act in a role when they have not been approved by HMRC or from which they have been prohibited.