Guidance

Employee Tax Advantaged Share Schemes — Penalty for an inaccuracy — CC/FS32

Updated 26 August 2024

This factsheet tells you about penalties we may charge if your annual return contains a material inaccuracy.

This factsheet is one of a series. For the full list, go to GOV.UK and search ‘HMRC compliance checks factsheets’,

When we may charge you a penalty for a material inaccuracy

We may charge you a penalty of up to £5,000 if, after carrying out a compliance check we decide that the return contains a material inaccuracy and:

• you have not sent us an amended return
• the inaccuracy was careless, or deliberate (we refer to these as ‘behaviours’ and explain them later in this factsheet)

A company must submit an amended return if:

• it becomes aware that information was not included in the submitted return
• it becomes aware that the submitted return includes something that should not have been included
• it identifies any other error or inaccuracy in the return

Once the company has identified an inaccuracy, it must submit the amended return without delay.

What you can do to reduce any penalty we may charge

We can reduce the amount of any penalty we charge you depending on our view of how much assistance you give us when you make a disclosure. We refer to this assistance as the ‘quality of disclosure’ or as ‘telling, helping and giving’.

Examples of making a disclosure include:

• telling us about, or agreeing that there is something wrong — and how and why it happened
• telling us everything you can about the extent of what is wrong as soon as you know about it
• telling and helping us by answering our questions in full
• helping us by replying to our letters quickly
• helping us by agreeing to attend any meetings, or visits at a mutually convenient time
• helping us by checking your own records to identify the extent of the inaccuracy
• giving us access to documents we’ve asked for without unnecessary delay
• giving us access to documents we may not know about, as well as those that we ask to see

We’ll reduce the penalty by the maximum amount possible if you:

• tell us everything you can about any inaccuracy as soon as you know about it
• do everything you can to help us correct it

If you delay in making a disclosure, you may still be entitled to a reduction but it will be smaller.

If we do not need any extra assistance from you we’ll give you the full reduction that the law allows for telling, helping and giving.

How we work out the amount of a penalty

There are 5 stages in working out the amount of any penalty. Each stage is explained in more detail as follows.

1. Determining our view of the ‘behaviour’

When there is an inaccuracy, we’ll work with you to find out what caused it. We refer to this as the ‘behaviour’. The type of behaviour will affect whether we charge a penalty and the amount of the penalty. There are 2 types of behaviour, these are as follows.

Careless

This is where you failed to take reasonable care to get things right.

Deliberate

This is where you knew that a return or document was inaccurate when you sent it to us.

2. Deciding the range that the penalty falls within

The penalty percentage falls into one of 2 ranges. The range it falls into depends on the type of behaviour. The 2 penalty ranges are shown in the following table.

Type of behaviour	Penalty range
Careless	0% to 30%
Deliberate	35% to 100%

3. Working out the reductions for the quality of disclosure

The quality of disclosure (telling, helping and giving), determines where the penalty will fall within the penalty range. The reduction we give depends on how much assistance you give us. For:

• telling we give up to 30%
• helping we give up to 40%
• giving access to records we give up to 30%

4. Working out the penalty percentage rate

The penalty percentage rate is determined by the penalty range and the reduction for the quality of disclosure.

Example

We found a careless inaccuracy that the customer had not told us about before we started our check. When we told them about the inaccuracy, they agreed with us.

The penalty range for a careless inaccuracy with a prompted disclosure is 0% to 30% of the maximum amount chargeable of £5,000.

The reduction for quality of disclosure (telling, helping and giving) was 70%.

Steps	Calculation
To work out the penalty percentage rate, we first work out the difference between the minimum and maximum penalty percentages.	30% minus 0% = 30%
We then take off the percentage reduction from the maximum penalty percentage we can charge.	30% × 70% = 21%
This gives us the penalty percentage rate.	30% minus 21% = 9%

5. Working out the amount of the penalty

To work out the amount of the penalty, we multiply the maximum amount chargeable by the penalty percentage rate. For example, the penalty would be £450 (£5,000 × 9% = £450).

How we tell you about a penalty

We’ll write to tell you how much the penalty is and how we’ve worked it out. If you do not agree with the penalty, or if you think there is any information we haven’t already taken into account, you should tell us straightaway.

What happens if you’ve deliberately done something wrong

We may carry out a criminal investigation with a view to prosecution, if you’ve deliberately done something wrong. For example:

• gave us information that you know is not true, whether verbally or in a document
• dishonestly misrepresent your liability to tax or claim payments to which you’re not entitled

Managing Serious Defaulters programme

If you’ve deliberately got your tax affairs wrong, we may need to monitor your tax affairs more closely. We have an enhanced monitoring programme called Managing Serious Defaulters. You can find more information about this in factsheet CC/FS14, ‘Managing serious defaulters’. Go to www.GOV.UK and search ‘CC/FS14’.

If you disagree with a decision

If we make a decision that you can appeal against we’ll write to you about the decision and tell you what to do if you disagree. For more information about your appeal rights, go to GOV.UK and search ‘HMRC1’ or ‘disagree with a tax decision’.

Your rights when we’re considering penalties

The European Convention on Human Rights gives you important rights when we’re considering charging certain penalties. If we’re considering penalties, we’ll tell you if these rights apply and ask you to confirm that you understand them.

You can find full details about these rights in factsheet CC/FS9, ‘The Human Rights Act and penalties’. Go to GOV.UK and search ‘CC/FS9’.

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with us, please tell the officer that’s contacted you. We’ll help you in whatever way we can. For more details, go to GOV.UK and search ‘get help from HMRC if you need extra support’.

You can also ask someone else to deal with us on your behalf, for example, a professional adviser, friend or relative. We may however still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy of our letter to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do, if you prefer.

More information

Our privacy notice

Our privacy notice sets out the standards that you can expect from us when we ask for information or hold information about you. Go to www.gov.uk and search for ‘HMRC Privacy Notice’.

If you are not happy with our service

Please tell the person or office you’ve been dealing with. They’ll try to put things right. If you are still not happy, they’ll tell you how to make a formal complaint.