27 March 2025
HM Revenue and Customs (HMRC) has released a new consultation on reforming behavioural penalties.
It looks at two key areas:
- Inaccuracy penalties, also known as ‘failure to take reasonable care’
- Failure to notify penalties
The proposals involve changing the way HMRC assess these penalties and Making the decision process simpler. HMRC state the proposed changes will be based on these core principles:
- simplifying the decision-making process to determine the quality of disclosure, by changing how HMRC assesses:
- timing of disclosure
- type of disclosure
- cooperation
- strengthening how penalties apply to the most serious failure and inaccuracies and repeated instance of these, by changing:
- the penalty rates for deliberate and repeated instances of deliberate behaviour
- simplifying offshore penalties, considering:
- the original rationale for these penalties, and how this applies now
- the case for higher rates for these penalties
- simplifying and strengthening penalty suspension, considering:
- ways in which the approach to suspension could be reformed to make it more effective and administratively simpler
Additionally, there HMRC provided an alternative approach where two penalties would be applied independently:
- a misdeclaration penalty which applies to all non-compliance but with a reduction dependent on the quality of disclosure
- and a civil evasion penalty where the case was deemed to be a deliberate way to avoid or reduce tax liability
- plus potential non-financial sanctions.
This consultation is open until 18 June 2025.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information.