CH401100 - Charging penalties: introduction: penalties for inaccuracies and under-assessments - FA07/Sch24
Whenever you discover an inaccuracy in a return or other document during a compliance check that has resulted in any Potential Lost Revenue (PLR), see CH82150, you must establish the behaviour that led to it to determine if the person is liable to a penalty. A penalty may be payable if the behaviour that led to the inaccuracy was careless or deliberate or deliberate and concealed. See CH402000 for more guidance on how to establish behaviour.
FA07/Sch24 also provides for penalties where there is an inaccuracy in a taxpayer’s document that was caused by another person supplying false information to the taxpayer or deliberately withholding information from the taxpayer. That other person may then be liable to the penalty, see CH81166.
A penalty is also payable where a person has failed to take reasonable steps to notify HMRC, within 30 days, of an under-assessment of tax, see CH81170.
You should be familiar with the contents of the technical guidance that starts at CH80000, which sets out what taxes and tax periods FA07/Sch24 applies to, in what circumstances a penalty is payable, and who is liable to pay it.
This guidance is about how you calculate and charge penalties for inaccuracies under FA07/Sch24.
In all cases Authorisation of penalty decisions, including ‘No’ and ‘Nil’ penalty cases must be recorded (see COG90190)
FA07/Sch24 and FA08/Sch41 penalties must be recorded and authorised on the National Penalty Processing System, see CH407500.
However, ‘No’ and ‘Nil’ penalty cases do not need to be entered on NPPS, but you must record the reason in Caseflow/CRMM by selecting the appropriate reason from the dropdown menu (pre-populated with ‘Not Applicable’) in response to the question ‘NPPS applies?’. For more information on this see CH407620.
This includes inaccuracies where the penalty falls below the cost-effectiveness limits and those that do not attract penalties, for example where there is a mistake despite taking reasonable care. This is because decisions not to charge penalties also need authorisation, and also so that management information can be gathered to show that penalties are applied consistently.
Inaccuracies in tax periods that were before the FA07 came into force must be authorised and charged under the old legislation and pre-existing procedures.