HMRC consultation on behavioural penalties: Simmons response

Simmons & Simmons has responded to HMRC's recent consultation on "Reform of behavioural penalties". The consultation explores options to simplify the ways in which penalties are calculated and applied and contains proposals to provide a stronger deterrent for those who deliberately avoid paying what they owe.

Based on feedback from our clients, Simmons & Simmons has responded to the various questions raised in the consultation. In general, our feedback was that clients agreed that the current system of penalty reductions is complicated and it is not easy understand why a particular percentage of the tax at stake is used as the basis for the penalty. However, any confusion is not a result of the multi-step calculation required for a penalty - which is simple enough to understand - but rather because clients feel the relevant factors leave lots to the discretion of the HMRC officer assessing the penalty.

That is to say, any confusion stems from the inputs, and how they are valued (and, indeed, how this can differ on a case-by-case basis). Therefore, our response was that clients tended to feel that more prescriptive guidance would be fairer and help them understand what HMRC requires.