HM Revenue & Customs enquiry and investigation penalties

Tax adjustments and penalties arising from enquiries or investigations


Tax enquiries: The new structure for adjustments to tax figures (potential lost revenue) and penalties is applicable where filing is due on or after 1.4.2009 relating to a tax period starting on or after 1.4.2008.


This widely means Form SA100 Tax Return for the year ended 5 April 2009 onwards and company year ends 31 March 2009 onwards.

Where the taxpayer disagrees with the inspector about tax assessments or penalties an appeal may be made to the tribunal service.

Adjustments to tax figures will be netted off against any overpayment of tax found in the same period.

Overpayment by another person or company etc. will not be netted off against the adjustment. This will need to be subject of an error and mistake claim which may or may not be accepted by the tax office.

Minimum to Maximum penalty

Timing adjustment only: correct tax paid later than due 5% minimum to a maximum of 5% per year of delay
All others:
* Careless, unprompted disclosure 0% to 30%
* Careless, prompted disclosure 15% to 30%
Deliberate but not concealed, unprompted disclosure 20% to 70%
Deliberate but not concealed, prompted disclosure 35% to70%
Deliberate and concealed, unprompted disclosure 30% to100%
Deliberate and concealed, prompted disclosure 50% to100%


Prompted disclosure means after an investigation has started. Unprompted means that the person making the disclosure has no reason to believe that HMRC have discovered or are about to discover the inaccuracy.

Mitigation of penalties arising from enquiries or investigations

If you can demonstrate that you have taken reasonable care, the penalty can be reduced to the bottom of the band. Some of the ways in which you can take reasonable are: .
- keeping reliable records to help prepare accurate tax returns.
- checking what the correct position is when you don't understand something.
- notifying errors in filed documents as soon as you notice them.

* Careless, unprompted or prompted disclosure penalty:
The whole penalty may be waived if the taxpayer complies with certain record keeping conditions over the following two years.

All enquiry and investigation penalties: mitigation between maximum and minimum:
Telling the inspector about the offence 30%
Giving the inspector reasonable help 40%
Allowing the inspector access to the relevant records 30%
Total mitigation from maximum to minimum 100%
There is no other mitigation below the minimum.
See tax treatment See Penalties on this page index


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