CH401293 - Charging penalties: introduction: offshore matters: failure to correct: reductions for disclosure
You can reduce the failure to correct (FTC) penalty if a customer does the following
(a) Tells us about the non-compliance that they failed to correct.
(b) Helps HMRC in relation to establishing the penalty position (for example by quantifying an inaccuracy in a document).
(c) Gives HMRC access to records.
When calculating penalties you must take account of the quality of the disclosure made by the customer, on the basis of telling, helping and giving access to records see CH123405 onwards for technical guidance.
To help with the calculation process, these elements have been allocated the following percentages within the total allowable reduction
| Element of disclosure | Percentage |
|---|---|
| Telling | 30% |
| Helping | 40% |
| Giving | 30% |
| Total | 100% maximum reduction |
Using this guide you must decide what proportion of the maximum reduction you allow for each of the three elements. The principles for establishing the quality of disclosure are similar to those used for schedule 24 FA07 inaccuracy penalties.
To establish the amount of reduction to give for each element you should consider:
- timing
- nature
- extent.
CH123408 provides examples of the circumstances that you will need to take into account.
To get the maximum reduction the customer must have:
- informed HMRC of any person who acted as an enabler of the relevant offshore tax non-compliance or the failure to correct it
- cooperated fully with HMRC
- provided all information within their power
- helped HMRC to resolve the matter without any unnecessary delay.
Partial co-operation, partial disclosure and delay will result in a lower penalty reduction.
You would give little or no penalty reduction if the customer:
- chose not to cooperate or
- was obstructive.
Examples
The following examples are to be used as a guide for treatment of failure to correct penalties.
Example 1
If a person has failed to correct their offshore tax non-compliance and did not know about it at that time, they can make a full disclosure as soon as they become aware of it. If they do so they will qualify for a full reduction for the telling, helping and giving elements of the reduction, even if we pointed the failure out to them. We will not give a full reduction of the telling element if the person delays making the full disclosure once they are aware of the non-compliance.
Example 2
If a person does not tell us anything about the non-compliance from the time the failure occurred to after we finished our check, they cannot qualify for any reduction for telling. However, they may still qualify for some reductions for helping and giving access.
Example 3
In cases where there are complex tax affairs and it would be difficult to know the full extent of the failure when the opportunity to disclose begins, we should accept that it is still possible for the person to qualify for the full reduction for telling. We will only do this if they have clearly disclosed everything they could at the earliest opportunity. They may also qualify for full reductions for helping and giving, depending on the timing, nature and, extent of their cooperation during the compliance check.