CH405070 | Charging penalties: suspending penalties: suspension of penalties flowchart

The penalty suspension flowchart below will help you make the right decision in most cases. It does not replace the more detailed written guidance at CH83100+ and CH405000+.

The flowchart and detailed guidance reflect HMRC policy and take account of (but do not always follow) Tribunal decisions. Customers and agents may challenge your decision by citing a particular First-tier Tribunal (F-tT) judgment that appears to support another view. You should still follow the HMRC policy and explain, if necessary that HMRC does not always agree with unbinding F-tT decisions and that your decision is in line with departmental policy.

Penalty suspension flowchart

Step 1: Is there a penalty for FTRC?

No - you cannot suspend the penalty
Yes - go to step 2.

Step 2: Is it likely the person will comply with the conditions of suspension?

Factors suggesting they are unlikely to comply include CH83146 :

a deliberate inaccuracy for the same compliance check

Step 3: Is it likely that the underlying cause of the inaccuracy would, if not remedied, result in the same or a different careless inaccuracy in a future return?

Content shown with reduced fidelity

you can suspend the penalty only if compliance with a specific suspension condition would help avoid a future penalty for a careless inaccuracy examples: where in an ongoing business a faulty recordkeeping process is the underlying cause of a carelessly inaccurate ITSA return of trading profit, it will be relatively easy to conclude that correcting that fault would help the person to avoid a future careless inaccuracy, and you can suspend the penalty however, if a careless inaccuracy was, and for the same reason, in that person’s final self assessment return following his retirement, so that he will no longer be required to make a self assessment return, there will be no condition that could be set to help him avoid a penalty for a careless inaccuracy in future, and you cannot suspend the penalty No → You should not suspend the penalty Yes → go to Step 4.

Step 4: Can you set at least one SMART condition of suspension?

SMART conditions are at CH83153:

Specific – related to the business or individual
Measurable – evidence can show the condition was met
Achievable – within the person’s power to meet the condition
Realistic – conditions cannot be unreasonable

Note: It’s essential that any suspension condition is measurable. Ask yourself: if you return later, can the person show clear evidence they met the condition? For example, putting a recordkeeping process in place can be evidenced by showing the system exists. In contrast, a vague promise to “take more care” cannot be evidenced.

No → You should not suspend the penalty
Yes → You must suspend the penalty and decide the suspension period

Suspended period guidance

the maximum suspension period is 2 years

the period should be long enough to meet the SMART condition, but no longer

if the underlying problem is already fixed and the condition is just to maintain improvement, a short period of a few months may be appropriate
if the condition involves a major overhaul of business systems, possibly at significant cost, a longer suspension period may be needed

do not extend the suspension period simply to include generic obligations like filing and payment