Penalties - special reduction

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Penalties - special reduction
  • Indirect tax penalties included within the scope of the special reduction
  • Applying the special reduction
  • Appeals

This guidance note provides an overview of the situations where HMRC may reduce the amount of the penalty imposed, to less than the specified minimum amount using the special reduction procedure. The special reduction will only be considered after the penalty has been calculated taking into consideration the circumstances surrounding the inaccuracy or failure and the quality of the disclosure made by the business.

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This note should be read in conjunction with the Overview of the three penalties introduced from 1 April 2010 guidance note.

Indirect tax penalties included within the scope of the special reduction

The following indirect tax related penalties are included:

  • inaccuracy penalties
  • failure to notify
  • VAT and excise wrongdoing penalties
Applying the special reduction
Conditions

HMRC will consider the following before determining whether it is appropriate to apply the special reduction to the penalty:

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  • whether the special circumstances applying to this particular case are either uncommon or exceptional and that are not otherwise provided for in the legislation
  • where the strict application of the penalty law produces a result that is contrary to the clear compliance intention of that penalty law. However, it must be noted that HMRC has stated that it will not use the special reduction to reduce the penalty where the reduction would be contrary to the clear compliance intention of the penalty regime.

Special circumstances are something that is not otherwise provided for in the relevant tax legislation. HMRC will need to consider the following before considering a special reduction as there might be no penalty. A reduced penalty

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