CCM10790 - Penalties and interest: incorrect claims - amount of the penalty - enquiries or examinations
Once you have established that the customer has made an incorrect claim or declaration, or supplied incorrect information, and they did this negligently the penalty is calculated using the following process for each year covered by an examination or enquiry.
- Establish the behaviour which gave rise to the overpayment and the amount of the over-claim, see CCM10710.
- Multiply the tax credits over-claimed by the penalty percentage for that behaviour category, see CCM10710.
- (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
- If the penalty calculated is more than £3,000 then the penalty is capped at £3,000 (the maximum penalty for tax credits).
If you have determined the behaviour is fraudulent/non fraudulent and you are using an S17 notice to finalise one year and set payments for the CY, see CCM10810
Example 1
A customer put down their income as £10,000 because they misread their P60 - income was £20,000. As this was clearly not a realistic figure for income, this was fraudulent/non fraudulent behaviour (30% penalty) which resulted in an over-claim of £4517.
- Multiply the over-claim by the penalty percentage: £4,517 x 30% = £1355.10
- Round the amount down to the nearest £10 = £1350.
The tax credits maximum penalty of £3,000 has not been exceeded. The penalty chargeable is therefore £1350.
Example 2
A customer put down childcare costs when actually they did not pay for childcare. This was fraudulent/non fraudulent behaviour (30% penalty) which resulted in an over-claim of £5,000.
- Multiply the over-claim by the penalty percentage: £5,000 x 30% = £1500.
- Round the amount down to the nearest £10 = £1500
- (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
The tax credits maximum penalty of £3,000 has not been exceeded. The penalty chargeable is therefore £1500.