Suspension of a penalty is a new concept introduced by Schedule 24 to Finance Act 2007 and which is extended to Schedule 40 to FA2008. It is intended to encourage the taxpayer to prevent further occurrence 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. We can only suspend a penalty where we can impose conditions which will help the person avoid penalties for careless inaccuracies in the future. This is likely to be appropriate for errors arising from systems or record-keeping weaknesses.
The penalty will be suspended to allow the person to take remedial action and no penalty will be payable if the person satisfies us that the suspension conditions have been met within the time allowed.
The period of suspension must be long enough to give the person reasonable time to meet all the conditions, but cannot exceed 2 years.
If at the end of the period the person has met all the conditions the penalty is cancelled.