HMRC is consulting on potential reforms to its behavioural penalty regime. The consultation is open until 18 June 2025 and seeks views on options to ‘simplify and strengthen’ the behavioural penalty regime for inaccuracies and failures to notify. The Institute will be responding to the consultation and is seeking your views on the proposals.
HMRC has been holding workshops on the proposed changes and have provided a useful document summarising the proposals an overview of which is provided below. Contact us by email by Friday 6 June to share your feedback.
For failure to notify penalties, HMRC is proposing to remove the timing of disclosure as a factor in determining the relevant penalty ranges and is also proposing to remove the narrower penalty ranges. There are also proposals to combine consideration of the type and quality of disclosure into one step, so that there is one set of headline rates. ‘Telling’ and ‘helping’ would be combined into one category to reduce overlap.
For deliberate and repeated non-compliance, the potential changes are:
- increased penalty rates for all deliberate behaviour (e.g. same level as category 2 offshore penalties),
- a new higher tier of penalty rates for repeated deliberate non-compliance (e.g. at the same level as Category 3 offshore penalties) and the potential for higher rates to be 'reset' for new occurrences in the future,
- the merger of ‘deliberate but not concealed’ and ‘deliberate and concealed’ into a single ‘deliberate’ category, and
- to codify ‘deliberate’ in penalty legislation, e.g. regarding intent, blind-eye knowledge, and, potentially, recklessness.
There are also proposals for offshore penalties and penalty suspension. Alternative approaches are also considered as are a range of potential new non-financial penalties, many of which are very concerning.
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