MTT55450 - Administration: Compliance: Penalties: Penalties for inaccuracies

HMRC is responsible for making sure that everyone pays the right amount of tax. Most people do pay the right tax at the right time and take care with the documents they submit. The purpose of the penalty provisions is to seek to influence behaviour by supporting those who try to meet their obligations and penalising those who do not. People expect reassurance from HMRC that there is no advantage for those who do not comply.

To provide this assurance, HMRC will charge penalties where people do not pay the right tax at the right time because the documents they submit to HMRC contain an inaccuracy, or because they fail to take reasonable steps to notify HMRC where an HMRC determination understates their liability to tax.

There are different circumstances under which HMRC may issue a penalty assessment. Penalties for inaccuracies are specifically for when a person carelessly or deliberately:

  • understates the tax they owe, or
  • makes a false or inflated statement of a loss or a claim for repayment of tax.

A filing member may be liable to a penalty for inaccuracies under Schedule 24 of Finance Act 2007 in relation to relevant documents (and the information provided with them) which must be submitted to HMRC for MTT purposes.

The filing member has 30 days to pay the penalty from the point at which the penalty is raised.

This is set out in paragraph 45, schedule 14 to Finance (No.2) Act 2023.

Relevant documents

The relevant documents are:

  • information returns and overseas return notifications (see MTT52010).
  • self-assessment returns and below-threshold notifications (see MTT53000).

A filing member may also be liable to a penalty under Schedule 24 FA07 if it is issued with an HMRC determination which understates the amount of MTT which is due, and it fails to take reasonable steps to notify HMRC of the understatement. See MTT55350 for further guidance on HMRC determinations.

Further guidance

Further guidance can be found in the Compliance Handbook at the following pages: 

  • to determine when a penalty for inaccuracy or failure to notify an under-assessment is payable, see CH81010
  • to identify the types of inaccuracies, see CH81100
  • to calculate the penalty due, see CH82000
  • to process the penalty, see CH83000
  • to deal with appeals against a penalty, see CH84000
  • to consider miscellaneous issues that may affect the penalty, see CH84500

HMRC can agree to a special reduction of the penalty in special circumstances. See CH82490.

There are also specific rules covering: 

  • how the penalty provisions apply in relation to agents and companies
  • what happens if a person incurs a penalty for an inaccuracy, and also incurs another penalty on the same tax.

The penalty provisions in Sections 100 to 103 of TMA 1970 do not apply to a penalty under Schedule 24 FA 2007.