United Kingdom


The new penalty provisions for incorrect tax returns effectively apply for the 2008/09 tax year onwards for personal tax. For companies, the new rules apply for accounting periods commencing on or after 1 April 2008.

The level of penalties are dependent on the behaviour of the taxpayer, whether a voluntary disclosure was made or prompted by HMRC, and the quality of the disclosure.


Table: Penalty levels

  • Mistake after taking reasonable care - 0%
  • Failure to take reasonable care - 0% to 30 % (15-30% if prompted)
  • Deliberate understatement - 20% to 70% (35% to 70% if prompted)
  • Deliberate understatement with concealment - 30% to 100% (50% to 100% if prompted)


New penalties were introduced, effective since 6 April 2011, to specifically deal with offshore non-compliance. This applies to income and capital gains tax only. The level of penalty will be dependent on the country where the income or gain arises:


Table: Offshore penalties

  • Category 1 - automatic exchange of information: The penalty rate will be the same as under existing legislation
  • Category 2 - exchange information on request: The penalty rate will be 1.5 times that in existing legislation - up to 150 per cent of tax
  • Category 3 - no exchange of information: The penalty rate will be double that in existing legislation - up to 200 per cent of tax


See details on HMRC’s website - How territories are categorised for offshore penalties

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