Use HMRC’s own framework to estimate the penalty range on unpaid tax. Penalties depend on three factors: the behaviour that led to the error, whether the disclosure was prompted by HMRC, and the quality of cooperation. This calculator applies the Schedule 24 FA 2007 framework used in the majority of HMRC enquiries.
Estimate looks high?
Most HMRC penalties are negotiable. We routinely reduce penalty categorisation from “deliberate” to “careless”, or from prompted to unprompted disclosure, cutting penalties by 50% to 90%. Let’s talk.
Speak to a SpecialistHow HMRC penalties actually work
HMRC penalties under Schedule 24 of Finance Act 2007 (the framework that covers most income tax, corporation tax, VAT and PAYE inaccuracies) are calculated as a percentage of the “potential lost revenue”, broadly, the unpaid tax. The percentage depends on three factors:
1. Behaviour
- Reasonable care: 0% penalty. Errors made despite reasonable care attract no penalty.
- Careless: 0% (unprompted, lowest) to 30% (prompted, top).
- Deliberate: 20% to 70%.
- Deliberate & concealed: 30% to 100%.
2. Disclosure type
Unprompted disclosures, where you come forward before you have reason to believe HMRC was about to discover the error, attract the lower end of each band. Prompted disclosures attract the higher end.
3. Quality of disclosure
Within each band, HMRC awards reductions for “telling, helping and giving access”:
- Up to 30% for telling HMRC about the error
- Up to 40% for helping HMRC quantify the error
- Up to 30% for giving HMRC access to records
Maximum cooperation moves the penalty all the way to the bottom of the band. This is where specialist representation usually adds the most value.
Offshore uplifts
For offshore matters, penalties can be multiplied:
- Category 1 (territories with strong information exchange, e.g. EU, US): standard penalty
- Category 2 (less strong, e.g. some Caribbean and Asian territories): 1.5× standard penalty
- Category 3 (limited or no exchange): 2× standard penalty