CCM10020 - Penalties and Interest: Penalty Overview

It is the policy of HMRC to impose monetary penalties on people who, in certain circumstances, fail to meet their obligations or do things incorrectly. This fits in with an enabling and regulating policy.

Through literature, Contact Centres, Enquiry Centres and so on we help/enable people to claim the right amount of tax credits. Those who deliberately ignore our advice risk having their application looked into either as an examination or an enquiry. Where the claim is found to be incorrect due to the claimant’s neglect or fraud, monetary penalties will be considered and may be imposed.

There are five situations that can lead to claimant penalties. These are:-

• failure to notify change of circumstances
• incorrect notification of change of circumstances
• supplying incorrect information
• failure to supply information
• Incorrect claims

There are different amounts of penalties for the different situations so each one will be looked at separately in this chapter. In addition to penalties, interest may be charged in certain circumstances.

Generally, we will not seek to impose penalties on claimants that are unemployed. However, in certain circumstances, it is important to undertake some basic checks to ensure that penalties are sought where they can be afforded. These circumstances are as follows:

• Employment has ceased within the last month - In any discussion with the claimant you should seek to establish if the claimant has received any lump sum, such as a redundancy package which places them in a position where a penalty could be paid.
• An offer of new employment has been made - You should seek a penalty and consider any means or hardship issues in the context of the income that will be received from the new employment. The starting date of the employment should also be taken into account when agreeing the terms of any offer.
• The most recent claim or declaration includes a declaration of “other income” - You should seek to establish exactly what the “other income” relates to and whether this puts the claimant in a position where a penalty can be afforded

Where you are making a decision in the absence of a response from a claimant who is unemployed, you should not consider submission of your case to the HO operational manager unless the criteria under bullets 1 or 3 (above) apply. It would be unusual in a non-response case to be aware that bullet point 2 (above) applies, but, should you be aware that it does, you should also submit the case to the HO centre manager to consider a penalty.