CCM10710 – Penalties and Interest: Incorrect Claims – Behaviours Leading to a Penalty - Enquiries or Examinations Opened on or after 6 April 2008

A penalty can only be charged where a person makes an incorrect statement or declaration fraudulently or negligently – see CCM10060 and CCM10065.

For enquiries and examinations begun on or after 6 April 2008, the level of the penalty will vary depending on the behaviour which led to the incorrect claim. The penalty is calculated as a percentage of the tax credits over-claimed and is rounded down to the nearest £10. The maximum penalty is £3,000 – see CCM10790.

Behaviours fall into one of five categories:

1. Mistake or misunderstanding - no penalty, see CCM10720.
   
   
2. Failure to Take Reasonable Care - 15% penalty - see CCM10730.
   
   
3. Serious Error - 25% penalty - see CCM10740.
   
   
4. Deliberate Error - 25% penalty - see CCM10750.
   
   
5. Deliberate and Systematic Over-claims - 50% penalty - see CCM10760.
   
   

Note: It is the behaviour of the claimant which determines the category of the penalty, not the size of the over-claim. You need to establish the behaviour which led to the error and the penalty category it falls into.