HMRC removes whole-pound rounding from two penalty calculations

HMRC has removed the instruction to round penalties down to the next £1 from two Compliance Handbook calculation processes.GOV The change concerns the 12-month further late-filing penalty where a person makes a disclosure, and penalties for VAT and excise wrongdoing.GOVGOV Both processes retain the formula for calculating the penalty, but neither now includes the former whole-pound rounding stepGOV.GOV

The late-filing process applies where the failure continues for 12 months and the person makes a disclosure.GOV It points to separate guidance for occasional returns, returns covering six months or more, Construction Industry Scheme (CIS) returns, and returns covering between two and six months. It also warns that higher percentages may apply where a return involves an offshore matter.

The calculation first establishes the quality of disclosure and whether it was prompted or unprompted. The maximum available reduction is the difference between the maximum and minimum penalty percentages. Multiplying that difference by the disclosure-quality percentage gives the actual reduction; subtracting the reduction from the maximum gives the penalty percentage to apply to the tax liability, or payment liability for CIS returns.

The minimum-amount check remains. The late-filing minimum-amount table lists £300 for returns covering between two and six months, for both deliberate-and-concealed and deliberate-but-not-concealed failures. For CIS returns, the corresponding minimums are £3,000 and £1,500. Removing the rounding instruction does not remove this separate comparison with the minimum amounts.

The VAT and excise wrongdoing calculation follows the same disclosure-reduction sequence, then applies the resulting percentage to potential lost revenue. Its table retains ranges of 30%–100% for unprompted deliberate-and-concealed wrongdoing and 50%–100% for prompted disclosure; deliberate but not concealed remains 20%–70% and 35%–70% respectively. The table expressly excludes Landfill Tax wrongdoing from its non-deliberate and knowing-supply-of-product rows.

Advisers reviewing calculation templates should identify any whole-pound round-down step taken from these instructions. The revised calculation steps give no replacement rounding convention, so the deletion alone does not establish how pence should instead be handledGOV.GOV

The relevant statutory framework is Finance Act 2009, Schedule 55, including paragraphs 6, 11 and 14–15, and Finance Act 2008, Schedule 41, including paragraphs 6B–6C and 12–13GOV.