How to reduce or avoid penalties

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The good people at TAXINSIDER have just published an piece on penalties and ‘special reduction’. Interesting reading…

Mark McLaughlin looks at the ‘special reduction’ in HMRC penalties for certain tax offences.

HM Revenue and Customs (HMRC) have an impressive and expanding range of powers. In many cases, those powers are underpinned by penalties for non-compliance with various statutory requirements by taxpayers and others.

However, some compliance regimes include provisions to reduce or eliminate penalties in certain circumstances. This article looks at one such provision, the ‘special reduction’. This potentially applies to various categories of penalty, including for errors in returns (FA 2007, Sch 24), failure to notify (FA 2008, Sch 41), and failure to make a return (FA 2009, Sch 55).

In each of those cases, the special reduction rules provide that if HMRC “think it right because of special circumstances” they may reduce certain penalties. The legislation does not define “special circumstances”, but merely states what they do not include (i.e. the ability to pay, or the fact that a potential loss of revenue from one taxpayer is balanced by a potential overpayment by another).

A special reduction includes HMRC ‘staying’ a penalty (i.e. stopping or postponing enforcement of a penalty) or ‘agreeing a compromise’ (i.e. foregoing all or part of a penalty).

You can read the full article here.

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