Suspended penalties
Suspension of a penalty is a new concept introduced by Schedule 24 of Finance Act 2007. It is intended to encourage the taxpayer to prevent further occurence of errors, by improving their systems and processes so that they can make correct returns in future.
Only a penalty for careless inaccuracy is eligible to be considered for suspension. HMRC can only suspend a penalty where we can impose conditions which will help the person avoid penalties for careless inaccuracies in the future.
The penalty will be suspended to allow the person to take remedial action and no penalty will be payable if the conditions we impose are fully met within the time allowed. This can be a period of up to two years.
The period of suspension must be long enough to give the person reasonable time to meet all the conditions, but cannot exceed two years. If at the end of the period the person has met all the conditions the penalty is cancelled.
Suspension may be appropriate for errors arising from systems or record keeping weaknesses.
Suspended penalties are an incentive to encourage taxpayer's to comply in the future.