CH300700 - The Human Rights Act and Penalties: when to tell the person about penalties and their rights
It is important to tell a person about their rights by issuing the HRA message and factsheet CC/FS9 (GOV.UK) - The Human Rights Act and Penalties, at the correct stage during a compliance check, see CH300900.
- If we issue the message too early, this may prejudice the person’s willingness to co-operate by incorrectly implying that we are considering penalties before we have evidence that there is something wrong.
- If we issue the message too late, the person may potentially incriminate themselves by providing us with information that they might have decided not to provide had they been made aware of their rights. This could, in some circumstances, prejudice our ability to charge a penalty.
However where there is any doubt about the timing, it is better to issue the HRA message a little too early rather than a little too late.
The correct time to issue the HRA message is when you have an evidence-based reason to believe that a penalty may be due. You must issue the message as soon as possible after you have established that a penalty may be due. This must always be before you ask the person any questions about how what is wrong occurred or the underlying behaviour.
If you have any reason to suspect deliberate behaviour, fraud or evasion at this stage of the compliance check you must follow the guidance at CH301100 before you take any further action.
The precise timing of the HRA message will depend on how quickly you establish that there is an evidence-based reason to believe that a penalty may be due.
- In most circumstances you should normally issue the HRA message and factsheet once you have identified an inaccuracy by examining the person’s records and they cannot offer an acceptable explanation to refute your belief that there is an inaccuracy. For example an adjustment may have been made in the accounts or tax calculation that was previously not explained adequately.
- In some limited circumstances we may have robust evidence that there is something wrong right at the start of the check and it will then be appropriate to issue factsheet CC/FS9 (GOV.UK) - The Human Rights Act and Penalties, with the appropriate general information factsheet CC/FS1(a, b, c, or d) (GOV.UK) and the opening letter.
When we open a compliance check either RIS or the officer who has passed the case to you (for example an officer dealing with a claim) will have identified at least one tax risk. The nature of the tax risks will determine whether there are also penalty risks and the seriousness of any penalty risks. For example, if we have robust third party information that indicates that a large capital gain has been omitted then there will be a high penalty risk. If, however, we are checking a return because some of the expenses claimed for a specific period are higher than we would normally expect, the penalty risk is lower, because there may be an explanation for the risks that have been identified.
This means that in practice you will need to consider at the start of the check how and when to address the penalty risk and consider the type of questions you are going to ask the person to establish the behaviour. You should not, however, ask any questions about the behaviour before you have gathered sufficient facts to be confident in your own mind that there is something wrong and that tax has been understated, unpaid or over-claimed rather there simply being risks that there is something wrong. This does not mean that you will necessarily have established the full extent of what is wrong but you will at this stage have good reason to believe that a penalty may be due. This is the correct stage to issue the HRA message and factsheet, following the guidance at CH300500 and CH300600.
When you have issued the HRA message and factsheet you will have informed the person of their rights when we are considering penalties and you will be able to address the penalty risks fully in parallel with the remaining tax risks.
During your discussions about the tax risks, a person may admit that something is wrong and start to explain how and why it went wrong. In these circumstances you must issue the HRA message immediately, to ensure the person is fully aware of their rights before you discuss any potential penalty.
Once you have issued the HRA message and factsheet you must normally issue any other relevant penalty factsheets at the same time, see CH202050. There will however be some limited circumstances when you will need to defer discussions about penalties even though you have issued the HRA message at the correct time, see CH301100. Under these circumstances you should not issue the relevant penalty factsheets until immediately before you begin to discuss penalties or why a penalty may be due.
For examples of when to issue the HRA message and factsheet, see CH300800.
In all circumstances, once you have issued the HRA message and factsheet, you must follow the steps at CH300500.