CH401284 - Charging penalties: charging penalties: introduction: offshore enabler's penalties: calculating the penalty

To calculate the penalty you need to follow the steps below:

1. Work out the value of the maximum amount of the penalty

For the enabler, this is:

  • the Potential Lost Revenue (PLR) used to calculate the underlying penalty (meaning the PLR of the person who carried out the tax evasion or non-compliance),

  • or £3,000,

whichever is greater - see CH124610.

This is Amount A.

2. Calculate the reductions for the quality of disclosure (also referred to as ‘telling, helping and giving’)

The quality of disclosure (telling, helping and giving), determines where the penalty will fall within the penalty range shown in CH401282. The reduction you give will depend on the enabler’s assistance. The ranges are for

  • telling up to 30%
  • helping up to 40%
  • giving access to records - up to 30%.

To work out the quality of disclosure (amount B) you should consider the guidance at CH401282.

3. Decide whether the disclosure was unprompted or prompted

Whether a disclosure was unprompted or prompted determines the minimum penalty percentage that you can charge. This is explained in more detail in CH401283.

The penalty falls into one of the ranges shown in the tables below depending on whether the disclosure is prompted or unprompted.

Having established the behaviour and whether the disclosure was unprompted or prompted, using the tables below, you need to find the:

  • maximum penalty percentage (C) and

  • minimum penalty percentage (D).

Reduction for disclosure in all cases except where the enabler penalty relates to an offshore asset move

Disclosure Range Minimum Range Maximum
Unprompted Higher of 10% of the PLR or £1,000 Higher of 100% of the PLR or £3,000
Prompted Higher of 30% of the PLR or £3,000 Higher of 100% of the PLR or £3,000

Reduction for disclosure where the enabler penalty relates to an offshore asset move

Disclosure Range Minimum Range Maximum
Unprompted Higher of 10% of the PLR or £1,000 Higher of 50% of the PLR or £3,000
Prompted Higher of 30% of the PLR or £3,000 Higher of 50% of the PLR or £3,000

Then calculate the maximum disclosure reduction (E).

(E) = (C) - (D)

4. Work out the penalty percentage rate

The penalty percentage rate is determined by the penalty range shown in step 3 and the reduction for quality of disclosure percentage.

To work out the penalty percentage rate you need to calculate the actual reduction percentage for disclosure, (F) = (E) x (B) and then

  • for all cases, except where the enabler penalty relates to an asset move, calculate the penalty percentage rate (G) = 100% - (F)
  • for cases where the enabler penalty relates to asset move calculate the penalty percentage rate (G) = 50% - (F)

5. Work out the amount of the penalty

To work out the amount of the penalty, we multiply the PLR by the penalty percentage rate.

Penalty amount = (Amount A) x (G)%

The minimum penalty (before taking into account any adjustments or reductions) is either £1,000 for unprompted and £3,000 for prompted disclosure. If the penalty calculated is less than the minimum amount the penalty due will be the minimum amount.

6. Consider special reductions

After working out the amount of the penalty you should take into account any special circumstances that the enabler has told you about. These will be uncommon or exceptional circumstances that you have not already considered when working out the quality of disclosure, see CH124600.

Once special reductions are considered, this will give you the amount of penalty that you will charge.

Example

A prompted disclosure, where the quality and timing of the disclosure had been minimal.

The penalty range for a prompted disclosure is 30% to 100% of the PLR.

The reduction for quality of disclosure (telling, helping and giving) was 7%.

Step 1 - maximum amount due

The PLR is £5,255,700 (amount A).

Step 2 - quality of disclosure

The percentage for the quality of the disclosure (b) has been calculated as 7%.

Step 3 - The maximum penalty percentage (c) is 100% and the minimum penalty percentage (d) is 30%.

So the maximum disclosure reduction (e) is 100 – 30 = 70%.

Step 4 -

The actual reduction percentage for disclosure (f) is 70 x 7% = 4.9% (say 5%).

The Penalty percentage rate to be charged (g) is 100% – 5% = 95%.

Step 5 -

The penalty to be charged is £5,255,700 x 95% = £4,992,915.

Step 6 -

In this example there are no special circumstances to take into account.