CH82444 - Penalties for Inaccuracies: Calculating the penalty: Penalty reductions for quality of disclosure: Telling: Timing of telling
You must check the date from which these rules apply for the tax or duty you are dealing with. See CH81011 for full details.
An overview of telling is at CH82442. The timing of the telling is the first of the three points to be considered when arriving at the reduction for telling. The second is the nature, see CH82446, and the third is the extent, see CH82448.
This page covers:
General approach to timing of telling
The time that has passed between the date when the inaccuracy arose and the date of the telling is not important. What is important is the stage in the check at which the person starts to make the disclosure.
Precisely when a person must disclose sufficient information to be able to qualify for the maximum telling reduction for the timing of telling depends on
- when the person is able to disclose the inaccuracy in full, and
- the type and scope of any compliance check that we may carry out.
The opportunity to tell begins when
- the person makes an unprompted disclosure, or
- we notify the person that a compliance check, which will or is likely to identify the inaccuracy in question, has been started, or
- for careless inaccuracies only during a compliance check we tell the person that there is or may be an inaccuracy of which the person was not, until that time, aware.
The opportunity to tell ends when the compliance check is completed.
Normally the maximum reduction for the timing of telling is only earned if all the telling occurs immediately after the opportunity to tell begins.
For deliberate inaccuracies maximum reduction for the timing of telling will not normally be earned if the taxpayer, having received notice of the start of a compliance check, delays making a disclosure. For example, waiting until we arrive to check his business records or until he receives a request for information etc. Each such case should be considered on its merits and the type of compliance check involved.
The reduction will decrease proportionately throughout the period when a disclosure can be made. So if a person doesn’t make a disclosure until the end of a compliance check, they can expect a low reduction for the timing of the telling.
If a person tells us about an inaccuracy when they had no reason to believe that we had discovered it or were about to discover it, this is an unprompted disclosure, see CH82420-CH82421. If a person makes an unprompted disclosure and discloses the full nature, see CH82446, and extent, see CH82448, of the inaccuracy, they are entitled to the maximum reduction for ‘telling’.
If the person has not disclosed the full nature or extent of the inaccuracy, then the unprompted disclosure they have made will be of limited value and the timing of the telling will not be of particular importance when considering the overall reduction for telling.
If a person tells us about an inaccuracy only when they had reason to believe that we had discovered it or were about to discover it, we consider this to be a prompted disclosure. Any disclosure that is not unprompted is prompted. See CH82420 and CH82421.
So, once you have informed a person that you have started a compliance check, they cannot make an unprompted disclosure about any returns or documents, or any parts of those returns or documents, that you have told them you are checking.
The person may, however, be able to make an unprompted disclosure about any returns or documents, or parts of those returns or documents, that you are not checking. Full disclosure is only unprompted if the information you requested when you started the check could not have given them reason to believe that you had discovered, or were about to discover, any other inaccuracies that they already knew about or suspected.
Situations that may arise
- If a person has given HMRC a return or document containing a deliberate inaccuracy, they can make a full telling disclosure at any time after that. If they make the disclosure before we tell them that we are starting a check, the disclosure will normally be unprompted. At any later time, typically when we start a check, it will be prompted unless the person can show that what we are checking would not have led us to discover the inaccuracy. But in either case, to qualify for a full reduction for the timing of their telling, they must tell us as early as they can. If we start a check and they delay telling us, we will allow a lesser reduction depending on the extent of the delay. So if a person delays telling us until the very end of the check, we will allow very little reduction for the timing of the telling.
- If a person has given HMRC a return or document containing a careless inaccuracy and did not know about it when they submitted the return or document, they can make a full telling disclosure as soon as they become aware of it. If they do so they will qualify for a full reduction for telling, even if we pointed the inaccuracy out to them. But, again, if they delay we will allow a lesser reduction for the timing of the telling.
- A person has given HMRC a return or document containing an inaccuracy that was neither careless nor deliberate at that time. The person subsequently discovers the inaccuracy for himself but fails to take reasonable steps to tell us about it. This means that the accuracy is treated as careless. The usual disclosure tests will apply to determine the timing of telling except where HMRC tells him about the inaccuracy during a compliance check. By definition in this scenario it could not be claimed that he was unaware of the inaccuracy as his awareness is what has caused it to be careless.
- If a person disputes that there is an inaccuracy or is unwilling to admit it, this does not necessarily mean that they cannot qualify for a full telling reduction. In order to qualify for the full reduction for telling they must agree that we have a different interpretation of the law and tell us everything we need to know about what we believe is inaccurate and why they disagree. They must do this immediately after we open our check if they know the return or document is not in accordance with our view of the law. If there is a careless inaccuracy that is in dispute, the person must agree that we have a different interpretation of the law and tell us everything we need to know about it immediately after either we tell them about it or they find out about it in another way. Of course, if the person’s view of the law is upheld, the person will have submitted an accurate return or document and therefore no penalty is due.
- In a case where it would be difficult to know the full extent of the inaccuracy 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, but only if they have clearly disclosed everything they could at the earliest opportunity.
- If we tell a person that we are extending a check, they must tell us immediately about any inaccuracies that they know or believe are in the returns or documents that we are extending our check to cover. If they do not, they cannot qualify for the full reduction.
- If a person does not tell us anything about an inaccuracy from the time the inaccuracy occurred to after we finished our check, they cannot qualify for any reduction for telling. However, they may still qualify for reductions for helping and giving access.