CH95300 - Penalties for VAT and Excise Wrongdoing: Calculating the penalty: Special reduction
We may use our discretion to reduce a penalty because of special circumstances.
Reducing a penalty includes
- staying a penalty, and
- agreeing a compromise in relation to proceedings for a penalty.
Staying a penalty means stopping or postponing enforcement of a penalty. Agreeing a compromise allows us to forego part of a penalty.
Special circumstances do not include
- the ability to pay, or
- the fact that a potential loss of revenue from one person is balanced by a potential overpayment by another.
The law ensures that the amount of a penalty is proportionate to the wrongdoing by
- taking into account the behaviour of the person
- gearing it to the potential lost revenue, and/or
- making it subject to statutory maximum and minimum levels.
The size of the resulting penalty is therefore not a special circumstance.
We will only consider the special reduction of a penalty where exceptional circumstances are identified that cannot be taken into account in arriving at the reduction for disclosure, see CH94600. This means that when you are determining the quality of a disclosure you should only consider those factors that are relevant, see CH94850. You should not be influenced by other factors.
Where a person requests a special reduction you should establish the facts and consider all of the relevant factors before reaching a decision. Make sure that you make a full record in the file of why you reached your decision and the specific areas you considered. If you think that a special reduction may be appropriate you must submit the case to Central Policy, Tax Administration Advice (TAA). Your submission should give a concise summary of the compliance check leading up to the penalty and full details of the facts upon which the request for a special reduction is based. You must not allow a special reduction without authority from TAA. Similarly, if you decide not to allow a special reduction and your refusal is disputed you should submit the case to TAA.
A person cannot appeal against our decision not to allow a special reduction, but they can ask for a review of our decision and/or appeal against the amount of the penalty we impose, see CH97100.
The appeal tribunal can apply our view of the special reduction to the penalty or can apply a different reduction where it believes it is appropriate, see CH97250.
Appeals are covered in more detail at CH97000.
