CISR85140 | CIS fraud measures: S72A Penalties: Penalty mitigation

The maximum penalty that can be charged is 30% of any amount determined under FA04/S62A (see CISR85020) or FA04/S62B (see CISR85040).

Mitigation should be considered as follows (percentages are fractions of the maximum penalty):

Seriousness of behaviour

Do not allow mitigation for less serious behaviour. In particular, you should not attempt to distinguish between ‘actual knowledge’ and where the person ‘should have known’. Even where it is clear that there was no actual knowledge, you should not allow any mitigation, or accept the argument that such a case is less serious and therefore deserves a lower penalty.

The S72A penalty is designed so as not to require any consideration by HMRC of the seriousness of the person’s underlying behaviour.

The maximum 30% penalty is set at the same level as the penalties for carelessness or for non-deliberate failure to notify. It is not therefore necessary to reduce it to recognise the less serious end of ‘knew or should have known’. All businesses charged this penalty benefit from the lower maximum, whether or not they had actual knowledge of deliberate non-compliance by another party.

Disclosures

Mitigation for disclosures should reward traders who make meaningful admissions which save HMRC time and effort. The sooner and more complete the admission, the greater the mitigation you can give.

It is rare for a trader to disclose that a determination is required before HMRC discovers it. If such a disclosure is made before HMRC is in a position to establish it for themselves, and if the consequent penalty is also accepted, then up to 50% mitigation is appropriate.

Allow up to 20% for the person who did not make any admission before you have carried out your fact-finding and analysis, but who makes it clear that they accept HMRC’s findings after you have found that a determination is required.

Allow 0% where the person does not accept that your determination is correct.

Assisting the intervention

Up to 30%. Whether or not the person accepts the HMRC determination, mitigation should be allowed to the extent that there has been helpful co-operation which has saved time for HMRC. This should take account of:

• Provision of records

• Attendance at meetings

• Explanations of what happened, to the extent you can accept them as helpful

Prompt co-operation will earn more mitigation than late co-operation.