When you’re navigating the insidiously complex realm of the HMRC tax regulations, it sometimes seems inevitable that you’re going to fall afoul of one or more tax “offences”. But take heart! A number of compliance regimes actually provide ways to avoid or at least mitigate some of those penalties after the fact. There is one particular provision, known as the ‘special reduction’ that can apply to a number of different types of penalties, including failure to notify (incredibly common), failure to make a return (second only to the first), and errors in returns (particularly common among those who manage their own taxes).
Note that none of the above exceptions actually guarantee grace, but they do outline the conditions under which one might be eligible for this sort of exception. Additionally, there is no guarantee that it will remove all of your penalty, in some cases (staying a penalty) the best you can hope for is an extension on the penalty. It’s not impossible, however, the HMRC can ‘agree to a compromise’ where they remove some or all of a penalty.
Do I qualify for these exceptions?
Once you’ve met the minimum requirements, there’s one little catch left in place… That they are left up to the discretion of the HMRC, as stated in the rules that they “think it right because of special circumstances.” Needless to say this leaves them with an immense amount of power in the final determination.
If you’re looking for a baseline to start from, HMRC manuals CH170800 and CH170900 explain where special circumstances may or may not exist respectively. If it’s included in CH170800, realize that it may be invalidated if the action is determined to be ‘deliberate’. Almost no case where it was done intentionally is cleared for exception.
If I don’t qualify, is that the end of the road?
Not necessarily, under certain circumstances it is possible to request an appeal and have it brought before a tribunal. Realise that by doing this you are essentially challenging the HMRC’s right to make a decision based on its own discretion, but there have been successful attempts. These are usually based in strong cases where you’re able to demonstrate how the logic used by HMRC to determine your ineligibility is off-base, allowing the tribunal to make its own determination.
A little bit of research and an expert on hand will go a long way towards establishing whether or not you have a case to make.
Cooper Bradshaw are specialists in handling penalties from their initial application, through to negotiation and then closure. Check out some of our real cases on the Case Studies, News & Updates page and do contact us if you have a penalty issue that you need assistance with.